Investor-State Dispute Settlement (ISDS) – Its place in the African Continental Free Trade Area (AfCFTA)
Keywords: enforcement, arbitration, interim relief, emergency awards
Introduction
The Indian Supreme Court’s verdict in Amazon v. Future Retail [1] has brought the enforceability of emergency orders in India into the limelight. The case recognized that in Indian seated arbitrations, emergency orders are enforceable under Section 17 of the Arbitration and Conciliation Act, 1996 (“Act”). The case, however, does not address the enforceability of emergency orders passed in foreign-seated arbitrations.
The current law in India is that there is no avenue for direct enforcement for such emergency orders. The aforesaid issue has only been discussed in three cases so far.[2] The Supreme Court has, however, not yet addressed the issue. The issue was most recently discussed by the Delhi High Court in Ashwani Minda v. U-Shin Limited (Ashwani Minda case).[3] This post analyses the Ashwani Minda case and the implications of the present law in India on the enforceability of emergency orders passed in foreign-seated arbitrations.
Enforcement of foreign-seated emergency orders was first discussed in detail in the Raffles Design case.[4] In the Raffles Design case, the Delhi High Court stated that foreign-seated emergency “awards” cannot be directly enforced in India.[5] Parties will have to seek interim relief under Section 9 of the Act, and the Court will scrutinize the issue independently of the emergency arbitrator’s decision.[6]
The Curious Case of Ashwani Minda v. U-Shin Ltd.
In the case before the Delhi High Court, the main Applicant was an Indian partnership firm and the main Respondent was a company incorporated in Japan. The parties had executed a Joint Venture Agreement (“JVA”). Dispute arose between the parties over an alleged breach by the Respondents of its obligations under the JVA. The alleged breach pertained to clauses in the JVA which imposed certain restriction on the transfer of shares.
The dispute resolution clause in the JVA stated that if the Applicant invoked the arbitration clause, then the arbitration would be commenced in Japan under the Japan Commercial Arbitration Association’s rules (“JCAA”).[7] The Applicants invoked the arbitration agreement and initiated an emergency arbitration proceeding in Japan. The emergency arbitrator rejected the relief sought by the Applicants. Thereafter, the Applicants filed an application under Section 9 of the Act in the Delhi High Court, seeking a similar relief.
Taking a pro-arbitration stance, the Delhi High Court stated that when the emergency arbitrator has given a detailed and reasoned order, parties cannot have a second bite at the cherry.[8] It was stated that the petition was not maintainable as the parties had already sought relief through the emergency arbitration process under the designated Rules.[9] The petition was dismissed by the Delhi Court with the reasoning that the court cannot sit as a court of appeal when a party is unhappy with the order passed by the emergency arbitrator.[10]
While the stance taken by the Delhi High Court is commendable, upon scrutiny the reasoning given in the judgment has concerning elements. The Delhi High Court stated that the parties had impliedly excluded the applicability of Section 9 of the Act in the present case.[11] The judgment is ambiguous on how such a conclusion was reached. The author believes that the Delhi High Court’s conclusion stems out from the fact that the JCAA Rules does not have a provision which states that approaching a national court for interim relief after the constitution of the tribunal is not incompatible with its rules. On the other hand, the Singapore International Arbitration Centre’s (“SIAC”) rules explicitly state that parties can approach national courts for interim relief.[12] Thus, by choosing the JCAA rules, the parties invariably excluded the applicability of Section 9 of the Act. Since the Delhi High Court differentiated between the Raffles Design case and the present case on the fact that in Raffles Design the governing institutional rules was the SIAC rules,[13] this understanding of the Delhi High Court’s conclusion is the most plausible explanation.
The author believes that the Delhi High Court provided a contrived reasoning just in order to reach a pro-arbitration conclusion. Institutional arbitral rules only provide an administrative framework for arbitrations. The role of an arbitral institution is limited to that extent. It would be problematic if courts inflate the consequence of the choice of arbitral rules made by parties. Such choice is not in comparison to the choice made by parties on the governing law or seat of the arbitration. These choices will have a direct consequence on the law that is applicable to the arbitration, and hence are of a different stature.
More importantly, the Ashwani Minda case does not clarify the stance in India on emergency orders. If the Applicants in the present case had succeeded in obtaining an emergency order, the Court would have possibly refused to grant a similar relief under Section 9 due to the rules chosen by the Parties. This would imply that in an arbitration governed by SIAC rules, relief can be granted under Section 9, but in an arbitration governed under the JCAA rules, there would be no avenue for the Parties to ‘enforce’ their emergency interim relief. Thus, parties that have chosen less sophisticated arbitration rules would be in a disadvantageous position. Further, the judgment contradicts the Raffles Design case, as the case explicitly stated that a Court would adjudge the interim relief sought independently to that of the emergency arbitrator’s decision. This makes the law in India on emergency orders vague and unclear.
Concluding Remarks
As mentioned above, the issue of enforceability of emergency orders passed in foreign-seated arbitrations has not been addressed by the Indian Supreme Court. While discussing the enforceability of emergency orders under Section 17 of the Act, the Supreme Court in Amazon v. Future Retail stated that party autonomy is respected under the Act.[14] Thus, if the Parties have agreed to emergency arbitration, they are bound by its decision.[15] The Supreme Court also emphasized the importance of emergency arbitration in decongesting the Court system.[16]
Based on the stance taken in Amazon v. Future Retail, it can be deduced that the Supreme Court’s stance on emergency orders in foreign-seated arbitrations should be similar. However, the issue of enforceability stems from the fact that there is no similar provision like Section 17 for foreign-seated arbitrations.[17] Thus, the enforcement of emergency orders in foreign-seated arbitrations becomes a more complex issue.
Notwithstanding the fact that the Ashwani Minda case has left the stance of Indian courts on emergency orders ambiguous, the foundation laid in Raffles Design is problematic. The cornerstone of emergency arbitration is speedy relief. If Parties have to apply again for interim relief under Section 9, where the Courts will independently evaluate the issue, the objective of emergency arbitration is defeated.
Therefore, the only plausible solution is to lay down the avenue for enforcement of such emergency orders. This can either be done by an amendment to the Act or by the Supreme Court clarifying the appropriate avenue for enforcement.
One possibility would be to establish that foreign-seated emergency orders are enforceable in India under Section 27(5) of the Act. Section 27(5) states that contempt of an order by an arbitral tribunal is equivalent to contempt of court. The Supreme Court in Alka Chandewar v. Shamshul Ishrar Khan,[18] stated that the powers of the court under Section 27(5) extend to all forms of contempt, including non-compliance of an interim order rendered by the arbitral tribunal.[19] Section 27(5) could potentially be an avenue to ‘enforce’ a foreign seated emergency orders. This is especially so because Section 27 is one of the few sections under Part I of the Act that are applicable to foreign-seated arbitrations.[20] This argument, however, has been previously rejected by the Delhi High Court in the Raffles Design case. The Delhi Court rejected the argument based on the reasoning that non-compliance of an emergency order in Singapore cannot be stated to be contempt of court in India. [21] Nevertheless, the author believes there is scope to further explore this avenue as courts in India do have jurisdiction on a party that is residing or situated in India, in an event of non-compliance by the party.
On a concluding note, the author believes that the Amazon v. Future Retail case has raised optimism regarding further discussion and dialogue on finding an efficacious model in India for enforcement of emergency orders in foreign-seated arbitrations.
Soma Hegdekatte is an international disputes lawyer, who has completed her undergraduate law degree from Gujarat National Law University and her LL.M. from Cornell Law School. She has worked with international arbitration teams in Hong Kong, Germany, South Korea and India. She has also worked on a wide range of investor-state and international commercial arbitration cases, including construction disputes, post M&A disputes and taxation related disputes.
Preferred Form of Citation: Soma Hegdekatte, “Enforceability of Emergency Orders Passed in Foreign-Seated Arbitrations – The Indian Perspective”, (ICAR, 11 Nov 2021) <https://investmentandcommercialarbitrationreview.com/2021/11/enforceability-of-emergency-orders-passed-in-foreign-seated-arbitrations-the-indian-perspective/>
ENDNOTES
[1] Amazon.com NV Investment Holdings LLC v. Future Retail Limited & Ors. 2021 SCC OnLine SC 557 (Hereinafter ‘Amazon v. Future Retail)
[2] HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd & Ors 2014 SCC Online Bom 102; Raffles Design International India Private Limited v. Educomp Professional Education Ltd & Ors. 2016 SCC Online Del 5521; Ashwani Minda & Ors. v. U-Shin Limited & Ors. OMP (I) (COMM.) 90/2020
[3] Ashwani Minda & Ors. v. U-Shin Limited & Ors. OMP (I) (COMM.) 90/2020 (Hereinafter ‘Ashwani Minda’)
[4] Raffles Design International India Private Limited v. Educomp Professional Education Ltd & Ors. 2016 SCC Online Del 5521 (Hereinafter ‘Raffles Design’)
[5] Raffles Design, ¶ 104
[6] Raffles Design, ¶ 105
[7] Ashwani Minda, ¶ 46
[8] Ashwani Minda, ¶ 55
[9] Id.
[10] Ashwani Minda, ¶ 56
[11] Ashwani Minda, ¶ 54
[12] Rule 30.3, SIAC Rules 2016.
[13] Ashwani Minda, ¶¶ 59-61
[14] Amazon v. Future Retail, ¶ 36
[15] Amazon v. Future Retail, ¶ 63
[16] Amazon v. Future Retail, ¶ 62
[17] Raffles Design, ¶ 103
[18] Alka Chandewar v. Shamshul Ishrar Khan (2017) 16 SCC 119
[19] Id. at p.7
[20] Section 2(2), Arbitration and Conciliation Act.
[21] Raffles Design, ¶ 107
The views and opinions expressed in the article are those of the Author(s) solely and do not reflect the official position of the institution(s) with which the Author(s) is /are affiliated. Further, the statements of the Author(s) produced herein should not be construed as legal advice.