THE AUTHOR:
Ammad Manzur, Advocate of the High Courts of Pakistan
Introduction
The Indian government has recently introduced an Arbitration and Conciliation (Amendment) Bill, 2024 (the “Bill”), which, other than changing the Arbitration and Conciliation Act’s, 1996 (the “Act”) name to simply “the Indian Arbitration Act, 1996”, also seeks to boost institutional arbitration in the country. The most significant development in this regard is the Bill’s proposed insertion of a new provision to the Act, which recognizes interim relief ordered by arbitral institutions under emergency arbitration (hereafter, “EA”), namely, Section 9-A.
This post shall consider the Bill’s proposed EA regime and examine to what extent it may empower institutional arbitration in India. In this respect, the current regime on EA, which has been developed by the Supreme Court of India (the “SCI”), will be compared with the abovesaid Section 9-A under the Bill. Further, the effect of the Bill’s rejection of certain well-intentioned recommendations and adoption of conflicting amendments in their stead will also be analysed.
The Current Emergency Arbitration Regime
Judicial Recognition
Prior to discussing the EA regime proposed under the Bill, it is useful to consider the current iteration of the EA regime which had been recommended by the Indian Law Commission (the “ILC”) and in the High Level Committee Review Report (hereafter, “Srikrishna Report”), respectively, and later affirmed by the SCIin its celebrated judgment of Amazon v. Future Retail.
The ILC, which had been tasked with removing deficiencies in the Indian arbitration regime that had come to light over the years, recommended in its report of 2014 that Section 2 (1) (d) of the Act be amended to include the concept of EA within its definition of the term, “arbitral tribunal”. This was done to ensure that institutional rules which provide for the possibility of EA are given statutory recognition. Subsequently, in 2017, the Srikrishna Report endorsed the ILC’s recommendation for recognizing EA in full. It was reasoned that since international practice favoured empowering institutional arbitration, “it is time” that India also followed suit. However, the aforementioned reforms were not enacted by the Indian legislature in the following three rounds of amendments to the Act in 2015, 2019 or 2021.
Nevertheless, the proposed reforms and the reasons given for their adoption resonated with the SCI, which held in Amazon v. Future Retail that they could be relied upon as the correct interpretation of the Act. It was further held that recognizing and enforcing EA awards would “decongest” courts from applications for such interim relief. Thus, interim relief ordered by an EA, where parties provided for such a possibility under their arbitration agreement, was held to be enforceable in the same manner as orders of interim relief rendered by the arbitral tribunal under Section 17 of the Act.
Something Borrowed, Something Blue
Although the reasoning employed in Amazon v. Future Retail speaks volumes of the SCI’s clear pro-enforcement approach towards EA awards, it is not without its limitations. This is because the SCI, in essence, affirmed the EA regime which had been proposed by the ILC and the Srikrishna Report – but the proposal itself suffered from certain drawbacks.
As acknowledged in the Srikrishna Report, the source of inspiration for the EA reform was the 2012 amendment to Singapore’s International Arbitration Act, 1994 (the “SAA”). Under the Singaporean amendment, the definition of “arbitral tribunal” provided under Section 2 (1) thereof was amended to also include within its scope EA. The SAA reform was replicated by the ILC, rendering EA-ordered measures enforceable in the same manner as tribunal-ordered interim measures under Section 17 of the Act.
However, due to fundamental differences between the regimes for enforcement of tribunal-ordered interim measures under the Act and the SAA, such a borrowing from the Singaporean jurisdiction is problematic:
- Non-Recognition of EA measures ordered by a foreign-seated arbitral tribunal: Pursuant to Section 2 (2) of the Act, the provisions in Part I thereof are restricted to Indian-seated arbitrations; except for those provisions whose application is specifically extended to foreign-seated arbitrations by way of the proviso thereto. Section 17, referring to the arbitral tribunals’ power to pass interim measures, is conspicuously missing from the proviso. Thus, under the current regime parties to a foreign-seated arbitration are denied EA-ordered measures. Conversely, under the SAA, all EA-ordered measures are enforceable, regardless of the seat. Under Section 12-A of the SAA, EA measures ordered by foreign-seated tribunals are considered to be arbitral awards, which may only be refused enforcement on grounds similar to Article V of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the “New York Convention”).
- Appeal Against EA-ordered measures: Under Section 37 (2) (b) of the Act, a unique right to appeal — not present in the Singaporean, or any other arbitration legislation, for that matter — is provided against interim measures ordered under Section 17. Therefore, EA-ordered interim measures are also subject to appeal. This significantly undermines the utility of the EA remedy – since such relief is, by definition, sought in situations of extreme urgency and an appeal against such an order would defeat its purpose.
The Proposed Emergency Arbitration Regime
Notable Improvements
Compared to the existing EA regime endorsed in Amazon v. Future Retail, the Bill provides an altogether different mechanism for recognition and enforcement of EA-ordered interim measures.
For starters, the proposed Section 9A of the Act provides for a self-contained regime. This approach is similar to the one adopted under another proposed bill, which also seeks to provide statutory recognition to EA, namely, the UK Arbitration Bill, 2024 (the “UK Bill”). The UK Law Commission (the “UKLC”) in its report cited the unsuitability of the remaining provisions of the English Arbitration Act, 1996 (the “EAA”) as the reason for creating a separate and self-contained EA regime. Hence, a new Section 41A has been proposed to be inserted to the EAA.
The Bill’s self-contained EA regime has helped address the existing regime’s defects:
- Recognition of EA measures ordered by a foreign-seated arbitral tribunal: The Bill extends the operation of the proposed Section 9A to foreign-seated arbitrations by making specific reference to the said provision in Section 2 (2)’s proviso.
- No Appeal Against EA-ordered measures: The Bill also specifically omits Section 9A from Section 37 of the Act, which provides for the possibility to appeal both court and tribunal-ordered interim measures.
Salient Issues
That said, there appear to be crucial issues with the Bill, which threaten to disturb the balance created under the Act between courts and arbitral tribunals aimed at promoting court-subsidiarity.
Well-Intentioned Recommendations
Currently, the Act allows parties to an arbitration to approach the court for interim relief, before or during the arbitral proceedings, pursuant to Section 9 thereof. However, court-ordered interim relief is subject to certain conditions, which are aimed at ensuring that the court plays a subsidiary role to that of the arbitral tribunal:
- Pre-Arbitral Tribunal Formation: Section 9 (2) of the Act provides that where interim relief is sought prior to the formation of the arbitral tribunal, the party seeking such relief commences the arbitral proceedings within a period of ninety days from the date the court orders interim relief.
- Post-Arbitral Tribunal Formation: Section 9 (3) of the Act provides that once the arbitral tribunal is in place, the court shall not entertain an application for such relief, unless it finds that circumstances exist which render tribunal-ordered relief inefficacious.
The Expert Committee, which recommended most of the amendments to the Act found under the Bill as outlined in its report of 7 February, 2024 (the “Expert Committee”), suggested certain changes to the above provisions to further enhance the arbitral tribunal’s primacy.
With respect to Section 9 (2), the Expert Committee had recommended that the provision be amended to state that if a party fails to approach the arbitral tribunal within the stipulated time period, the court ordered interim relief it has secured would stand vacated. Thus, transforming this merely directory provision into a mandatory one, with a defined consequence in case of breach by the applicant.
Further, the Expert Committee had recommended changes to Section 9 (3) in order to address a lacuna which had come to light in Arcelor Mittal Nippon Steel v. Essar Bulk Terminal. In the said case, it was held that a pending application for interim relief filed pre-tribunal formation was not subject to the bar contained in Section 9 (3) because the application had already been “entertained”. To rectify this issue, it was recommended that the word “entertain” be replaced with the phrase, “proceed with”. The Expert Committee emphasised that such an amendment would unburden courts from pending Section 9 applications.
The Bill’s Unexpected Turn
Surprisingly, however, the Bill not only disregarded the Expert Committee’s recommendations – but also included changes that alter the Act’s existing regime on interim relief.
Section 9 (2) has been left as-is, with no consequence for a recalcitrant applicant who does not apply to the arbitral tribunal for interim relief post-formation. More importantly, instead of implementing the Expert Committee’s recommendations regarding Section 9 (3), which addressed the possibility of its abuse, the Bill deletes it altogether.
While it is anyone’s guess why Section 9 (3) has been deleted against the Expert Committee’s recommendations, since no reasons have been provided, it appears that it was done to nip the issue of court intervention in the bud. However, its deletion will do more harm than good.
Tipping the Scales
The significance of Section 9 (3) in promoting the arbitral tribunal’s primacy under the Act cannot be overstated. In the absence of this provision, there is no qualitative bar on the applicant regarding the inadequacy of tribunal-ordered relief in its specific case. All an applicant needs to satisfy under the changes proposed under the Bill is a directory time limitation given under Section 9 (2), with no consequence of court-ordered interim relief lapsing on expiry thereof.
In Amazon v. Future Retail, the SCI relied heavily on Section 9 (3) for contextualizing tribunal-ordered interim relief and reaching its conclusion that the overall scheme of the Act mandated minimal court intervention. This was instrumental in the court holding that EA-ordered relief fell squarely within Section 17 of the Act, despite not being expressly mentioned in the law.
It is important to note that the UKLC decided against deleting a provision similar to Section 9 (3) present in the EAA, namely, Section 44 (5). This provision stipulates that a court may only intervene in cases where the arbitral tribunal has “no power or is unable…to act effectively”. In doing so, the UKLC cited the “salutary influence” Section 44 (5) has in preventing undue court intervention in the arbitral process.
The UKLC’s reasoning applies with even greater force in the Indian context. This is because, unlike English law, the Act, even with Section 9 (3) in place, does not subject court intervention to specific criteria such as urgency. Instead, court intervention is subjected to a generic condition of arbitral tribunal-ordered relief being inefficacious—a fact to be determined by the court itself.
Conclusion
Emergency arbitration is an inherently costly venture, with most arbitral institutions requiring the payment of an upfront fee unconnected with the amount involved in the dispute – which may well be lower and thus act as a disincentive. With the scales tipped further still in favour of court intervention under the proposed reforms, there is little prospect of the Bill’s brave new emergency arbitration regime promoting institutional arbitration in India.
ABOUT THE AUTHOR
Ammad Manzur is an Advocate of the High Courts of Pakistan, with a wide-ranging experience in both contentious and non-contentious commercial law. He has a keen interest in international arbitration and has represented clients in cross-border disputes before international arbitral tribunals as well as in associated litigation before courts. His qualifications include an LL.M in International Commercial Law from the Brunel University London.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
