Author - Arya Vansh Kamrah is a 5th Year B.B.A. LL.B. (Hons.) student at Symbiosis Law School, Pune.
Abstract
Emergency arbitration can be described as a highly accelerated institutional arbitration process centred exclusively on urgent measures. The procedure involves the appointment of an emergency arbitrator, usually by the arbitral institution itself, to listen to and decide on parties’ demands for interim measures prior to the formation of the arbitration tribunal. The research article investigates jurisdictional intricacies and enforcement issues related to emergency arbitration in international conflicts. The author endeavours to scrutinise the enforceability of the same under the New York Convention, UNCITRAL Model Laws, and National Legislations, with special emphasis on recent developments in India.
Keywords: International Arbitration, Emergency Arbitration, Emergency Awards and Enforceability
Introduction
Interim procedures are prevalent in international commercial arbitration because they seek to protect evidence, safeguard properties, and maintain “status quo” when a dispute arises. The establishment of the arbitration tribunal takes a certain amount of time. Arguably, the most crucial period in every arbitration is the time between the establishment of a dispute and the constitution of an arbitral tribunal.
One of the confines of arbitration is the limitation of a tribunal’s ability to issue any interim measure until it is constituted. As a result, the parties to the dispute were at the mercy of the domestic courts for interim relief. The process of judicial intervention notionally defeats the purpose of international arbitration, as its primary objective is to adjudicate without the interference of the judicial systems of a country. Accordingly, parties had to reach out to the courts, which turned out to be a time-consuming exercise.
After an extended tradition of courts being the sole choice in such circumstances where the tribunal was not constituted, several international arbitration institutions sought to meet the market’s need for commercial arbitration by offering a rapid and efficient method for delivering emergency relief.
Several scholarly papers on emergency arbitration look cautiously positive about the procedure’s efficiency, but the enforcement of the emergency arbitrator’s decision remains a serious concern. Given the existing legal status of emergency arbitrators and scholarly literature, this article aims to answer trepidation about the enforceability of emergency arbitration awards.
An Overview of Emergency Arbitrators and Emergency Awards
Jurisdictional Aspects
Although the authority of both emergency and standard arbitrators stems from the arbitration agreement, the emergency arbitrator’s jurisdictional power has two peculiar characteristics.
Firstly, the jurisdiction of emergency arbitrators is provisional because it is in effect until the establishment of the arbitral tribunal, even though a few institutional rules enable emergency arbitrators to preserve their jurisdictional authority for a limited time even after the establishment of the arbitral tribunal.
Secondly, the emergency arbitrator’s jurisdiction runs concurrently with that of the national courts. In practice, some institutional norms specifically indicate that the existence of emergency arbitration processes does not vitiate the possibility of parties pursuing urgent recourse from the domestic courts.
Nature of the Award?
The emergency arbitrator’s ruling may take the shape of an order or a partial arbitral award. Institutional norms like Schedule 4 of the Hong Kong International Arbitration Centre (“HKIAC”) Rules enable emergency arbitrators to issue the pronouncement in any manner they deem suitable, as long as certain procedural conditions are followed, such as the decision being well-reasoned and in writing. Particularly, Article 29(2) of the International Chambers of Commerce (“ICC”) Rules requires emergency arbitrators to deliver orders. The form and nature of an emergency award have a practical bearing on the enforceability of such a decision. Thus, institutions like the London Court of International Arbitration (“LCIA”) have specified the nature of the award as an order through its guidance notice.
Enforceability of the Emergency Arbitration Awards
The New York Convention
A key legal instrument in global commerce, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, or more popularly the New York Convention (“Convention”) enables around 170 governments to enforce arbitral decisions that are equivalent to judicial decisions made locally. Nonetheless, some observers contend that because emergency rulings are only transitory, their legality under the Convention is in doubt. Albert Jan Van den Berg, an expert on international arbitration, stated, “an arbitral award in summary arbitral procedures can be enforced outside the Netherlands (domicile of the party) under the 1958 New York Convention.”
For an award to be legitimate under the Convention, it must fulfil twin conditions, i.e., be both ‘final’ and ‘binding’. An emergency decision meets both of these requirements. The French Court of Appeal in the Braspetro Oil Services Company Case held that an arbitral tribunal’s interlocutory order should be enforceable under the convention, according to some national courts. However, there were concerns about whether civil law countries would recognise emergency arbitration. An interlocutory award ought to be regarded as definitive, even if the effect of it is temporary in nature. This view was further consolidated in the U.S. case, Publicis Communication v. True North Communications Inc., where the Illinois Court inferred that finality is attained even if an award settles interim issues raised by the parties.
Although the convention does not unequivocally recognise emergency awards, the enforceability of the same is implied in the Convention.
The UNCITRAL Model Laws
The 2006 modifications to the UNCITRAL Model Law on International Commercial Arbitration 1985 (“Model Law”) established a specialised enforcement system based on an ‘opt-out’ mechanism to promote consistency in the implementation of interlocutory arbitral awards. This problem was discussed decades ago when the UNCITRAL Secretariat proposed including Article 17, which empowers the arbitral tribunal to obtain executory aid if necessary. The 2006 changes entirely redesigned Article 17 of the Model Law, with the most noteworthy change being the insertion of Article 17H (1), which makes the interim remedy granted by the tribunal legally binding upon application to the appropriate court.
However, some jurists advocate for a stringent interpretation of Article 17H and believe that the section strictly applies to the interim awards issued by the regular arbitration tribunal. Others argue enforcement may still be denied under Article 17I due to the short period time in an emergency arbitration.
National Legislations
In certain countries, the enforceability of emergency awards is not recognised under the international legal regime but rather under specialised legislation that permits them to be enforced. Countries like Singapore and New Zealand have broadened the scope of “arbitrator” to consider emergency arbitrators, making emergency decisions enforceable. Some countries have resolved the question of enforcement, such as Hong Kong’s Arbitration Ordinance and Bolivia’s Conciliation and Arbitration Law, by expressly providing for emergency arbitration. However, most domestic laws do not expressly provide for emergency arbitrations.
Enforceability In India
In recent practice, India has recognised emergency arbitration hearings and the enforceability of resulting awards in the form of an order. However, the enforceability of emergency awards is not bereft of hurdles. The Law Commission of India, in its 246th Report, advocated including emergency arbitrators in the definition of an arbitral tribunal under Section 2(1)(d) of the Arbitration and Conciliation Act, 1996 (“Act”); however, the proposal was not adopted. Later, the Srikrishna Committee proposed modifying the legislation to allow the execution of emergency rulings, however the suggestions of the committee in this regard were also not implemented. Nevertheless, it was argued that emergency rulings can be enforced in India under Part I of the Act as a decree of the court.
Since enforcement in the aforementioned manner was not assured, parties adopted an indirect method of implementing these emergency rulings, i.e., by filing a suit in national courts after obtaining an emergency award. While this procedure does not strictly enforce an emergency award, it allows the court to take into account the merits or legitimacy of the emergency award. HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. was one of the first cases where the Bombay High Court applied the aforesaid indirect method.
The Delhi High Court in Ashwani Minda v. U-Shin Ltd. demonstrated a pro-arbitration stance by refusing to entertain an application under Section 9 of the Act and upholding the enforceability of the Japan-seated emergency award. The court, while refusing the application, stated that “a second bite at the cherry” was not possible. However, Indian courts’ verdicts on emergency arbitration vary, making it critical for India to have legislative recognition of emergency arbitration comparable to that of Hong Kong and Singapore.
In the case of Amazon.Com NV Inv. Holdings LLC v. Future Retail Ltd., the validity of the emergency award was addressed by the Supreme Court. Amazon had filed for emergency arbitration against the Future Group under the relevant institutional rules, citing a breach of the shareholders agreement. As a result, an injunction was issued preventing Future Group from acting upon the ‘disputed transaction’. Amazon moved to put into effect the emergency award by filing a case with the High Court of Delhi. The Delhi High Court rejected objections and asked Future Group “to preserve the status quo till the reserved ruling is issued.” An appeal thereafter resulted in a division bench delaying the implementation of the interim order on another ground, notwithstanding the enforceability of the emergency decision.
The Delhi High Court, in its final order, imposed a fine on the defendants for disobeying the emergency order. The court officially recognised the process of emergency arbitration and the legitimacy of emergency awards, but the problem of enforcing foreign-seated emergency arbitrations in India remains unresolved.
The efficacy of the arbitration ecosphere in India has been called into question time and again. It is noteworthy that several changes suggested by the 246th Law Commission Report and the Srikrishna Committee Report were incorporated into the Act, but the legislature failed to appreciate the formal recognition of emergency arbitration. However, emergency arbitration became a preferred method of urgent redressal by 2015.
The Queen Mary University of London and White & Case (2021 International Arbitration Survey) highlighted that 39% of the respondents stated that “the ability to enforce decisions of emergency arbitrators or interim measures by arbitral tribunals” would attract more investments. Therefore, having an arbitration scheme that is appreciative of the emergency measures is important to attract foreign investments. The Ministry of Law and Justice realised the need to improve the current arbitration framework in India by 2023. As a result, the Ministry appointed a 16-member panel expert committee, chaired by Dr. T. K. Viswanathan, former secretary, Ministry of Law and Justice. The primary objective of establishing the expert committee was to promote India as a worldwide arbitration hub and a desirable location for international commercial arbitration. The recommendations were to be coherent with the target of a $5 trillion economy by providing a conducive legal environment for economic investment.
In February 2024, the Expert Committee to Examine the Working of the Arbitration Law and Recommend Reforms in the Arbitration and Conciliation Act 1996 (“Expert Committee Report”) proposed a draft to improve the existing framework and laid emphasis on the need to adopt emergency arbitration through the legislation. It further proposed the insertion of Section 12B to acknowledge emergency arbitration and decisions issued thereunder. The committee recommendations further allowed arbitral institutions to implement rules for the nomination of emergency arbitrators and the management of emergency arbitral proceedings.
The Committee stated that it is critical to include legislative provisions for emergency arbitration in the Act to avoid uncertainty about the legitimacy of the emergency arbitration process and the orders issued by emergency arbitrators. The regulations governing emergency arbitration, when enforced uniformly and consistently, would limit the number of applications filed under Section 9 with the courts while simultaneously incentivising the adoption of arbitration institutions to conduct arbitral procedures.
Therefore, with the increased global pressure to adopt investment-friendly laws and in light of the committee recommendations and its findings, the emergency arbitration is expected to be finally incorporated into the Indian legal framework.
Conclusion
Emergency arbitration is a very effective instrument with enormous potential. The fact that most major arbitration centres now include emergency procedures in their institutional norms demonstrates this reality. It is evident that emergency arbitration surmounted early scepticism. This nuanced form of arbitration has advanced significantly over the last few decades and is today a dependable and well-developed option for parties seeking temporary relief.
The enforceability of emergency arbitration rulings varies by jurisdiction. Under the New York Convention, emergency awards are typically regarded as enforceable if they are finaland binding. Similarly, the UNCITRAL Model Law indirectly establishes a framework for the enforcement of emergency verdicts, treating emergency arbitrators equally with ordinary arbitrators.
Nonetheless, the enforceability of emergency arbitration awards in India is still uncertain. While Indian courts have recognised the legitimacy and validity of the emergency arbitration and the resulting award, there are no particular statutory measures governing their execution. In such a case, the author believes that the recent suggestions of the Expert Committee on Arbitration to provide legislative recognition to the emergency awards and to include additional rules recognising emergency arbitration is a welcome step towards addressing this issue and ensuring the due enforceability of the emergency arbitration awards in India.
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