India Rejects the Internationally Accepted Remedy of Emergency Arbitration: Reasons and Implications
Article by Nitya Jain
With growing transactions and declining approachability in trade and commerce, disputes inevitably arise. Today, irrespective of whether a dispute is domestic or international, parties prefer an unbiased forum for resolving their disputes. Effectively, Arbitration is the most suited method when it comes to sidestepping the lengthy procedures of court. The capability of parties to achieve a speedy relief is fundamental to any arbitration proceeding.
In order to safeguard and further uphold party autonomy, major arbitration institutions develop mechanisms and procedures that eliminate judicial involvement in arbitration proceedings. When a party seeks an interim relief, they either resort to domestic courts or wait for the constitution of the tribunal. Resorting to courts undermined the very purpose of choosing arbitration over litigation and pendency of tribunal formation gravely hampers the expedite procedure. In order to address the aforementioned fallacy international institutions and various countries have developed the concept of Emergency arbitrator.
A party appoints an Emergency Arbitrator when it urgently requires a relief that if not granted, will lead to grave loss of asset or evidence. Proceedings of such an arbitration is governed by agreement and consensus of the parties. Emergency arbitrator is not a part of the tribunal in fact, his job ends with the granting of relief and he is not to decide the case on merits. The types of emergency reliefs sought are broadly categorized in four broad headers- (i) anti-suit injunctions; (ii) reliefs aimed at restoring status quo of the disputant; (iii) measured intended at safeguarding enforcement of a future award and (iv) orders for interim payments.
A good amount of time has passed since the concept of Emergency Arbitrator has been around. The institutions are continuously introducing provisions and rules as an attempt to improve the workability of the concept of emergency arbitrator. Various countries in their domestic laws have also adopted the concept.
Though the novel concept of emergency arbitrator is highly appreciated in the arbitration community globally, enforcement of the order passed by the arbitrator is still debatable. It eventually boils down to the subjectivity of various national courts and laws of the respective countries as to whether an order passed by an emergency arbitrator is enforceable or not. Except Hong Kong and Singapore all other national laws are silent on the question of enforceability of emergency arbitrator’s decision.
The Indian law does not expressly recognize the concept emergency arbitrator. In an attempt to abide by the global trend and also to provide statutory recognition to the awards passed under institutional rules like SIAC and ICC, the 246th Law commission report did recommend the adoption of the concept of emergency arbitrator under sec 2(d) of the Act which stated “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators and, in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator.” However, the same was rejected by the legislature while amending the Arbitration and Conciliation Act, 1996 and thereby the concept is not a part of the Arbitration and Conciliation Act, 2015.
There is also no express judicial recognition of the awards passed by emergency arbitrator or its enforcement. Till date the Indian courts, for that matter, had no opportunity to test the validity of the same. Due to the non- recognition of the concept of emergency arbitrator in India the trend has been such that parties after obtaining an emergency arbitrator award outside India, enforce the same in India via seeking interim order under Sec 9 of the Arbitration and Conciliation Act.
The Indian legislature consciously omitted the inclusion of the provision of Emergency arbitration in the amended Indian Arbitration and conciliation Act. The non-acceptability of Emergency Arbitration in India has numerous probable reasons behind it.
Firstly, Emergency arbitration fails to address the issues of third party i.e. an emergency arbitrator cannot grant measures against a third party. An emergency arbitrator’s jurisdiction is limited to the signatories and cannot be extended beyond. On the contrary, Indian courts, like courts of other jurisdictions, can grant interim relief against third parties under certain circumstances (for example, where such orders are necessary to protect the subject matter of the arbitration). Secondly, unlike domestic courts, emergency arbitrators cannot pass ex-parte orders as this would go against the purpose of their constitution – both parties won’t be provided with an equal opportunity. Indian courts, like other jurisdictions, can grant ex parte orders in exceptional circumstances. Ex parte orders become necessary in some special circumstances where if the respondent comes to know about the order he might displace the assets or other similar grounds. Thirdly, an award passed by an emergency arbitrator is to be further scrutinized by the actual tribunal and can also be overturned, this however is not the case with the interim orders passed by the domestic courts. Lastly, enforceability of emergency arbitrator’s award is again a controversial question. The scant judgments passed by the Indian Judiciary only have dealt with the enforceability of the awards passed in Singapore or Hong Kong. India is yet to clarify its position regarding the enforceability of awards in other jurisdictions.
However, it is undeniable that Emergency arbitration ensures minimum court intervention which is the need of the hour in order to develop India as a pro-arbitration country. It would a progressive step towards making India a global hub for arbitration, like Hong Kong and Singapore. Often emergency arbitration proceedings are hassle free and ensure efficiency, which eventually develop a set standard of behavior for the parties. Experience also shows that parties are more likely to comply and abide by the orders passed by emergency arbitrators. An emergency award if recognized in India will definitely be beneficial for parties if the parties against whom the claim is made have their assets in a different jurisdiction which recognizes emergency awards. For India to become a pro- arbitration country, it is high time it harmonizes its arbitration laws with international standards.
She is a 3rd year BA LLB student from Institute of Law, Nirma University, India.