The term emergency arbitration has gained much prominence after various developments which took place in the legal battle that ensued between two corporate giants viz. Amazon and Future Group. Previous to this, one was acutely aware of this particular kind of interim relief wherein an “emergency arbitrator” is appointed to issue emergency relief before the constitution of the Arbitral Tribunal, and same can be very detrimental in ensuring that any of the parties does not suffer on account of procedural delay or even to protect the very subject-matter of the arbitration. Even the parties who consciously opt for arbitration are under impression that it is a quicker dispute resolution mechanism and at the threshold, emphasis needs to be made for approaching the problem of generating an interim relief even before the formation of the Arbitration Tribunal. The present article discusses about emergency arbitration, its advantages, challenges, and its legal status in India.
What is an emergency arbitration
There may be an instance, where parties may need an urgent interim relief even before the constitution of an Arbitral Tribunal so that the very purpose of parties opting for the arbitration does not get defeated. In such cases, emergency arbitration comes into the picture. The concept of emergency arbitration is akin to the concept of ad-interim injunction as provided by Section 37 of the Specific Relief Act, 1963 and regulated by the Code of Civil Procedure, 1908, wherein both the cases the primary measure is the preservation of the matter in status quo till the dispute is heard on merits. The provision of ad interim injunction is wildly used by the Indian courts while restraining one party in civil disputes and intellectual property cases. It is pertinent to mention herein that an emergency arbitrator is agreed to and arranged by the parties themselves without recourse to a tribunal at the first instance, therefore it is advisable to opt for any institutional arbitration, which recognises the concept of the emergency arbitrator and can arrange for it at the earliest, over adhoc arbitration, as in the latter case, if parties fail to reach consensus over the appointment of an arbitrator, or if any of the parties fails to appoint an arbitrator, the parties, even not intending, would be forced to take the recourse of the courts, for the appointment of an arbitrator, which in cases, may lead to delay in adjudication of the dispute. However, the provision of emergency arbitration is, enforceable and applicable only to parties who are signatories to the arbitration agreement and is applicable unless the contracting parties have opted out of it.
The provision of emergency arbitration was adopted, at first, by the International Centre for Dispute Resolution (“ICDR” for short) in 2006, wherein the concept of the emergency arbitrator and its procedures were laid down. Thereafter, the 2012 version of the International Chamber of Commerce (“ICC” for short) Rules also adopted the same provisions as that of the ICDR. The 2012 version of ICC Rules provided for the emergency arbitrator to be appointed when a party needs urgent interim or conservatory measures that cannot await the constitution of an Arbitral Tribunal and the same were then followed, by other institutions as well, such as Netherlands Arbitration Institute (“NAI” for short), the Singapore International Arbitration Centre (“SIAC” for short), Swiss Arbitration, Institute of the Stockholm Chamber of Commerce (“SCC” for short), the Australian Centre for International Commercial Arbitration (“ACIA” for short).3
SIAC, for example, have introduced the concept of emergency arbitration which allows an emergency arbitrator to be appointed before an arbitration even begins, within the space of one calendar day, who is required within the space of 2 weeks to issue emergency interim measures, freezing the status quo, assuming that the claimant, the party, requesting such measures, has demonstrated the appropriate need for that. This provides a mechanism for ensuring that the party’s rights are safeguarded, while the dispute resolution process proceeds.4
As pointed out by Gary Born:5
At the same time, these Rules all require very prompt and professional action by the arbitral institution and emergency arbitrator, which imposes burdens and risks on the institution, and thus, the parties. Despite this, unless practical application in coming years is to the contrary, these approaches appear to be sensible steps towards improving the arbitral process.
Advantages of emergency Arbitration
It goes without saying that the sole objective of the emergency arbitration is to provide urgent pro tem or conservatory measures to a party who cannot await the formation of an Arbitral Tribunal.6 In addition to this, this provision can eliminate the difficulty of a party who is under obligation to approach before courts in different jurisdictions for obtaining any instant relief, per contra same can be conveniently granted by the emergency arbitrator and can be enforced thenceforth by applying before the courts of a different jurisdiction. It also obliterates the chances of different courts in different jurisdictions passing varied orders further enhancing the complication for the parties, therefore, bringing uniformity in the order, and courts in different jurisdictions are only left with the responsibility of enforcing it within their jurisdiction. Hence, in nutshell, we can say that the present process is more time efficient for the courts inasmuch the parties, and perhaps most importantly, it provides for an immediate temporary solution which parties are bound to comply since the award passed on this head also becomes precedence once the Arbitral Tribunal is constituted.7
Challenges to emergency arbitration
The foremost challenge of an emergency arbitration is its recognition and enforceability. Many countries are still in process of recognising the sanctity and binding nature of the order passed by an emergency arbitrator which gives a preclusive effect whereas a lot of it including its enforcement depends on which jurisdiction the application for enforcement is filed. There may be a probability that a country might recognise the provision of emergency arbitration and will enforce the order passed by it but in the same case, any court of different jurisdiction might be incapable to recognise and enforce the same, due to reason of absence of specific legislation which recognises the order passed by an emergency arbitration. The situation gets much grimmer when an interim order passed by an emergency arbitrator is unlikely to qualify as an award and the situation becomes much dicey on how different courts would react to such requests and much likely the parties who has interim order in his favour would be left at the mercy of the respective courts to get it enforced.
Another challenge is that it is interim binding and once the Arbitral Tribunal is constituted the same is not binding and in case if any other person is appointed as an arbitrator to the substantive Tribunal, the latter can vary or suspend it, in case the time stipulated for such award has not expired. The form of interim relief can also play a part particularly when interim relief granted by the emergency arbitrator is in the form of order rather than an award.8
One major particular drawback is that there is no certainty for the consequences of non-compliance of the order made by the emergency arbitrator. Although, Article 29(2) of the ICC Rules requires the parties to undertake to comply with any order made by the emergency arbitrator, however, the same is silent about any consequences of non-compliance thereof. Parties who even manage to get interim orders in their favour would further struggle to get it enforced and will still need to rely on the support of the courts of that jurisdiction, meaning thereby that they are being virtually dragged into the litigation which they never intended to do so.
For instance, in India, the statutory provision relating to emergency arbitration is not clear, as the Arbitration and Conciliation Act, 19969 (“the Act” for short), is silent about the concept of emergency arbitration. Even if we read Section 2(1)(d) of the Act10 which defines an Arbitral Tribunal, goes on to describe it as a sole arbitrator or a panel of arbitrators. It is silent about whether an emergency arbitrator comes within the definition of the Arbitral Tribunal or not. The said has created a very dicey situation in the minds of the corporate giants who choose the seat of arbitration on basis of the flexibility of the local laws in adopting international conventions whereas predominantly the New York Convention11. More so, when the Act is silent on the recognition of emergency arbitrator it is very less likely that same can be enforced by the Indian courts.
Mechanism for emergency arbitration
The emergency arbitration procedure, which is broadly similar in all the above-named arbitration institutions, provides for a sole arbitrator to be appointed by the institution on request of any of the parties, on an expedited basis, to determine the immediate interim relief claimed by the party. The appointed emergency arbitrator is free to set his procedures, which should be clear from the outset. The procedures set by the emergency arbitrator could include the timelines for exchange of submissions inasmuch any reply thereto, a hearing if any, the mode of communication to be adopted by the parties, and how evidence is to be adduced.12 One thing worth mentioning is that interim measures or conservatory relief granted by an emergency arbitrator would be having an effect only for a stipulated period, as the same has been constituted for a limited purpose that is for grant of interim or conservatory relief and would immediately dissolve thereafter, once the purpose is served or the stipulated period has expired. To get a good understanding of how whole process of emergency arbitration is conducted, refer to this concise, yet comprehensive YouTube video.13
Legal status of emergency arbitration in India
Despite there being no statutory recognition for the order passed by an emergency arbitrator, the Supreme Court has come up with a very artful interpretation of the Act, suitably meeting the needs of the New York Convention, in the famous case Amazon.com NV Investment Holdings LLC v. Future Retail Ltd.14, holding that the interim award passed by an emergency arbitrator appointed under the Arbitration Rules of the Singapore International Arbitration Centre is recognised under Section 17(1) of the Act15, and thus, enforceable under Section 17(2) of the Act. The Court was wise to further observe that there was nothing contained in the Act which prohibits contracting parties from agreeing to a provision providing for an award made by an emergency arbitrator. On the contrary, it was observed that a conjoint reading of Sections 2(6) and (8) of the Act16, if given a harmonious interpretation, would allow the contracting parties to incorporate institutional rules into their arbitration agreement, and such incorporation should be given paramount importance whereby in case the institutional rule provides for emergency arbitrator’s orders, the same would be covered under the Act. In particular, the Supreme Court was of the view that if the orders of an emergency arbitrator are not given effect to then the same would render the whole concept of emergency arbitration otiose.
That the Supreme Court has shown much-needed enthusiasm towards upholding the instrumental rules which include orders passed by an emergency arbitrator and such orders are referable to inasmuch can be made under Section 17(1) of the Act. The holistic approach adopted by the Supreme Court would further robust the arbitration mechanism in India and needless to say that the same would enlighten India’s prospect towards becoming an international arbitration hub. It would certainly help India in making a big leap in following international comity in the field of international arbitration and would also stand the test of minimum judicial intervention in respect of the arbitration proceedings, which was envisaged in Article 5 of the UNCITRAL Model Law on International Commercial Arbitration and also incorporated in the form of Section 5 of the Act17. Moreover, in the present conditions, what works as icing on the cake is that the recognition and thus enforcing of such orders will certainly decongest the Indian courts which are already neck-deep in work. However, whatever herein is said, does come with a caveat, that is, arbitration mechanism only offers an alternative option to litigation wherein it is intended only to supplement and not supplant the legal system enshrined in the Constitution. A perfect example would be that of Belgium which in 1985, in an attempt to make the country arbitration friendly inasmuch the preferred seat for international arbitrations, provided that a non-Belgian citizen who had no business in Belgium would not be permitted to apply to a Belgium court to set aside an arbitral award. It was believed and was done under the impression that with no judicial review of the award in Belgium, parties especially international parties, would be attracted to choose Belgium as a seat for arbitration. However, the reality was to the contrary, wherein nobody opted for Belgium for the seat of arbitration, which can be mainly attributed to the reason of lack of possible court review.18Thus, this analysis, clearly suggests that even parties in international arbitration prefer court supervision at the place of arbitration.
3 Swiss Rules, 2012, Art. 43; Australian Centre for International Commercial Arbitration Rules, 2011, Art. 28(1); NAI Arbitration Rules, 2010, Art. 42; Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, 2010, Appendix II, Art. 8; SIAC Rules, 2013, Art. 26(2), 28ASA Bull. 462 (2010).
4 Modern Arbitration: Live – An Interview with Gary Born, <https://www.wilmerhale.com/-/media/files/shared_content/editorial/news/documents/20190319-modern-arbitration-live-an-interview-with-gary-born.pdf>.
5Gary B. Born, International Commercial Arbitration, Ch. 17 on Provisional Relief in International Arbitration, 2453 (2nd Edn., Kluwer Law International 2014).
6Martin J. Valasek and Jenna Anne De Jong, Enforceability of Interim Measures and Emergency Arbitrator Decisions, <https://www.nortonrosefulbright.com/en-in/knowledge/publications/6651d077/enforceability-of-interim-measures-and-emergency-arbitrator-decisions>.
7ICC Rules of Arbitration, 2012, Arts. 29(1) & (4) and Appendix V.
8Martin J. Valasek and Jenna Anne De Jong, Enforceability of Interim Measures and Emergency Arbitrator Decisions, <https://www.nortonrosefulbright.com/en-in/knowledge/publications/6651d077/enforceability-of-interim-measures-and-emergency-arbitrator-decisions>.
12Stephanie Khan and Benson Lim, Emergency Arbitrator Procedures: What Should a Practice Note of Best Practices Consider?, <http://arbitrationblog.kluwerarbitration.com/2019/01/11/emergency-arbitrator-procedures-what-should-a-practice-note-of-best-practices-consider/>.
18Ajar Rab, Chapter X Delocalization/Autonomous Theory in International Commercial Arbitration 58 (NALSAR University of Law, Hyderabad, First Edn., 2019 Reprint 2021).