Commercial consequences of foreign arbitration emergency awards

Following the 2006 changes to the UNCITRAL Model Law (model law) enabling arbitral tribunals to grant interim relief, a number of institutions including the Singapore International Arbitration Centre (SIAC) changed their rules to allow parties to apply for emergency arbitration. Other institutions with similar provisions include the International Chamber of Commerce (ICC), the International Centre for Dispute Resolution (ICDR), the Hong Kong International Arbitration Centre (HKIAC) and the Stockholm Chamber of Commerce (SCC).


Parties entering into arbitration agreements that follow the rules of these institutions contract to allow emergency arbitration. However, the problem is whether arbitration provisions in jurisdictions where emergency awards are to be enforced have kept pace with the changes, or whether they provide for interim relief by the courts or arbitration tribunals in the usual but inadequate way. The recent emergency award made by an emergency arbitrator under SIAC rules in the dispute between Amazon and the Future Group, and the open defiance of that award by the Future Group shows the inherent lack of enforceability of an emergency award.


Section 17 of part I of the Arbitration and Conciliation Act, 1996 (act), which is not applicable to foreign-seated arbitrations, provides for interim measures to be made by arbitral tribunals unless otherwise expressly agreed by the parties. Section 9 of part I of the act provides for applications to be made to the court for interim measures at any time before the enforcement of the arbitral award.


However, part II of the act, which is applicable to foreign-seated arbitrations, does not have a similar provision, thereby making foreign-seated emergency awards unenforceable except by filing a fresh suit before a court. The provisions of part II of the act only provide for the enforcement of final awards in cases of foreign-seated arbitrations.


A clear distinction is made under the SIAC rules between a tribunal and an emergency arbitrator. The act uses the term arbitral tribunal, which reinforces the interpretation that the law only refers to the tribunal as defined in the SIAC rules and does not recognize an emergency arbitrator. In the absence of clear provisions in the act, judicial pronouncements on the enforceability of foreign-seated awards have not been consistent. While courts have recognized emergency arbitrations in cases such as Steer Engineering in 2019, they have also held the opposite, and that the orders of emergency arbitrators are not enforceable under the act, as in Raffles Design in 2016.


The Law Commission in its 246th report in 2014 recommended changes to the act to overcome the challenges to the enforceability of emergency awards, and proposed that the definition of an arbitral tribunal under section 2(1)(d) of the act should be broadened to include the role of emergency arbitrators in order to ensure due recognition to emergency awards and to ensure the act mirrors the rules of arbitration institutions in this regard. The recommendations of the Law Commission were supported in its report of 2017 by the High Level Committee, which was set up to review the institutionalization of the arbitration mechanism.


A number of arbitration-friendly jurisdictions now allow the enforcement of emergency awards to enable recognition of rules of arbitration institutions and party autonomy. Arbitration laws in Hong Kong and Singapore in the Asia region permit the enforcement of emergency awards. In England and the United States of America, courts have given recognition to emergency awards and have also held that courts do not have the power to grant relief when the parties have already agreed under the rules of an arbitration institution that emergency arbitrators shall have the power to grant such relief.


Despite favourable judgments and the recommendations of the Law Commission and the High Level Committee challenges remain in the enforcement of foreign-seated emergency awards. There is a stated objective to make India a hub for international arbitration. However, there are continued commercial and confidentiality challenges by way of court-granted interim relief procedures as opposed to the use of easier dispute resolution where confidentiality bound arbitration tribunals drive interim and urgent relief mechanisms. This highlights the urgent need for the provisions of the act to be brought into line with the rules of arbitration institutions in relation to emergency arbitrations and the enforceability of foreign seated emergency awards. This will fulfill the underlying principle of party autonomy.


This article was originally published by Indian Business Law Journal:

https://law.asia/commercial-consequences-foreign-arbitration/

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