Introduction- Emergency Arbitration
Emergency Arbitration, an issue that came in limelight due to the legal battle that ensued between two corporate giants viz. Amazon and Future Group.
Emergency Arbitration is a mechanism where the parties can seek an urgent interim award before the formation of an arbitral tribunal. An emergency arbitrator is appointed who is expected to pass the emergency award within a specified period, i.e., usually 14-15 days from the appointment of the Emergency Arbitrator (EA). This mechanism is used to ensure that the parties do not suffer due to any procedural delays. This urgent relief also protects the subject matter or the purpose of choosing arbitration.
Legislative and Judicial Position
The Arbitration and Conciliation Act, 1996 (“Arbitration Act”), under Section 9(1) and 17(1), has conferred identical powers to both Indian Courts and arbitral tribunals seated in India w.r.t. interim order and award. Section 17 of the Act provides for interim measures ordered by the Arbitral Tribunal. However, the Arbitration Act does not provide for the emergency award. Although internationally, many arbitral tribunals have included provisions for Emergency Awards, India still has no legislation incorporating the same. Most arbitrations follow the “opt-out” policy for Emergency Arbitration which means that the agreement should specifically exclude “Emergency Arbitrator Provisions” to exclude its enforceability.
EA is appointed by the parties themselves without approaching a tribunal at the first instance. Thus, the parties should choose institutional arbitration which has the provision of Emergency Arbitration to avoid delays. The International Centre for Dispute Resolution (“ICDR”) first adopted the provision of Emergency Arbitration in 2006, wherein the concept of the EA and its procedures were laid down.
Previously, the Bombay High Court and the Delhi High Court have accepted Emergency Awards and EA but all of them were concerning foreign seated arbitrations. For the first time in the case of Amazon and Future Retail, the Supreme Court accepted Emergency Arbitration in an Indian seated arbitration.
Amazon v. Future Retail Case
In the case of Amazon.com NV Investment Holdings LLC v. Future Retail Limited and Others, it was for the first time that the Hon’ble Supreme Court held the emergency award to be enforceable in an Indian seated arbitration. There remains confusion about whether the parties should undertake the route of Emergency Arbitration or the Court.
The arbitration in the instant case was governed by SIAC rules. Under Schedule 1 of the SIAC Rules, Amazon initiated the Emergency Arbitration Proceedings and got the order in its favour. Amazon filed an application to enforce the award under Section 17(2) of the Act in the Supreme Court. Now, Supreme Court had to decide if an Emergency Arbitrator’s Award will be covered under Section 17(1) of the Act. The Court examined if the definition of “arbitral tribunal” under Section 2(1)(d) of the Act will include Emergency Arbitrator. Thus, Court held that Emergency Arbitrator will be included under Section 17(1) of the Act. The SC also held that the emergency award is referable and will be covered under Section 17. As the applicability of Section 17 is only limited to Indian seated Arbitration, thus, the principle laid down in the Judgment will be applicable to Emergency Award awarded in Indian seated Arbitration.
The Emergency Award will have the same power and enforceability as the interim order by the tribunal. Thus, Emergency Awards have been given the status of interim orders passed by the tribunal.
Still, there is a grey area related to this topic as the Emergency Award awarded in the foreign seated arbitrations is not covered under this judgment. The Parties will have to approach the Civil Court for the enforcement of the same. Also, getting an emergency order enforced that has already been passed is a struggle. The parties may have to approach the courts to get this order enforced leading to further delay like in the case of Amazon v Future Group.
Third-Party Funding to the rescue
These positions being taken by the Courts prove their motive to encourage arbitration in the country and make the country an international arbitration hub. It will also help to minimize judicial intervention w.r.t arbitration proceedings.
With this encouragement of arbitration, parties also need to take care of arbitration costs. With the increase in the costs related to arbitration and the view of the companies to cut their legal costs, Third Party Litigation Funding has come up as a saviour for both lawyers as well as the claimants.
Just a few decades ago, third-party litigation was an obscure concept. But, in recent decades, third-party litigation funding has become a major source of alternative investment as well as funding litigation expenses. Recent legislative and judicial decisions in India and internationally have permitted and encouraged the use of third-party litigation funding. In the countries like Hong Kong and Singapore, arbitration rules allow Third Party Litigation Funding in emergency arbitration costs as well. Thus, Third Party Funders like LegalPay can help Indian Law Firms, Lawyers, and litigants to meet their ligation and arbitration expenses including Emergency Arbitration.
Thus, Emergency Arbitration is a concept that has been given recognition in the Indian judicial system very recently and this shows the intent of the judiciary to promote arbitration and to encourage people to move to arbitration from the courts. With this positive step, there also comes the challenge of meeting the expenses related to arbitration. But LegalPay with its litigation funding assures parties to take care of their arbitration expenses and to help them get swift and hassle-free justice.