Amazon’s Win vs Reliance’s Defiance: Why the Emergency Arbitrator?

It is unlikely that the Emergency Arbitrator order would be enforced in India. Then why did Amazon seek it?

Amazon restrains Future group from proceeding with $3.38 billion deal with Reliance

(Image: Shruti Mathur/The Quint)

On 25 October, an Emergency Arbitrator, in a SIAC Arbitration initiated by Amazon.com Inc (Amazon), restrained Future Group from proceeding with a $3.38 billion deal with Reliance Retail Ventures’ Limited (RRVL). On the same day, RRVL issued a media statement stating that, it intended to enforce its rights and complete the said transaction with Future Group, without delay.

Such disregard raises questions on the sanctity and relevance of such orders. Under the Indian law, orders passed by Emergency Arbitrators are not enforceable, especially when passed by an arbitral tribunal not seated in India. 

However, such orders have a number of strategic advantages.

Amazon has reportedly challenged the RRVL-Future Group transaction on the grounds that it is in violation of a shareholders’ agreement between Amazon and the promoters of Future Group. Under the Rules of the Singapore International Arbitration Centre, an emergency arbitrator can be appointed to consider urgent requests which cannot wait until the actual arbitrators who decide the main matter are appointed.

It is reported that Amazon used this provision and sought urgent relief to prevent completion of this transaction, and succeeded in getting such a relief from the arbitrator seated in Singapore.

Problems of Enforcement of Emergency Arbitrator Order

The Arbitration and Conciliation Act, 1996 (Arbitration Act) is the law that governs arbitration in India. It lends legal validity to decisions by arbitrators.

However, the Arbitration Act does not specifically recognise emergency arbitrators. Further, while interim orders passed by arbitrators in India are recognised and can be enforced as if they were orders of a court, such orders passed by foreign tribunals are not enforceable.

It is, therefore, unlikely that the Emergency Arbitrator order that Amazon has secured in its favour would be enforced in India.

In Amazon’s case the problems of enforcement are compounded. RRVL along with certain other Future Group Entities, do not appear to be party to the SIAC Arbitration and are not bound by an interim order passed by the Emergency Arbitrator. As such, there is nothing preventing the transaction from proceedings to the extent that that the consent of persons/entities party to the SIAC Arbitration, is not required.

Then Why Did Amazon Seek the Order?

Given this position of law, a question that begs to be answered is why Amazon has gone through the pains of obtaining an interim order, which by the looks of is nothing short of a toothless tiger.

Three factors may be relevant.

First, while emergency arbitrators’ orders may not be directly enforceable, they continue to have a very high persuasive value. This is all the more so since proceedings before an Emergency Arbitrator, especially those under reputed institutional rules such as the SIAC, are quite elaborate and intensive, even at an interim stage. This becomes particularly relevant if Amazon were to now approach an Indian court to seek reliefs similar to those granted by the Emergency Arbitrator.

Under the Indian law where a court is approached for seeking interim reliefs, it needs to examine issues independently, without being bound by any decision an Emergency Arbitrator may have granted.

However, experiences from the Bombay and Delhi High Courts in the past has shown that Emergency Arbitrator orders are quite persuasive, and courts have often granted reliefs that’s are largely similar to those granted by such arbitrators.

Second, in some countries, Emergency Arbitrator orders are directly enforceable through court. Where parties find that enforcement in these jurisdictions is helpful to them, then an Emergency Arbitrator’s order may prove to be cost effective and more efficient that initiating multiple proceedings for similar reliefs. It is unclear if this may have any relevant in the context of Future Group, but with businesses operating globally, a presence in any one of the jurisdictions where such orders can be enforced can make businesses quite cautious and circumspect.

Third, in a vast number of cases, Emergency Arbitrator’s orders are voluntarily complied with by the Parties. This is primarily because the arbitral tribunal that eventually passes a final decision on the actual dispute usually takes note of the conduct of the parties during the arbitration. A non-cooperating party is unlikely to find much favour from the arbitral tribunal when the balance is evenly placed. This is particularly because a number of institutional rules, including in particular the SIAC Rules, require voluntary compliance by the parties with orders of Emergency Arbitrators.

Thus, while such orders are not directly enforceable in India, they continue to remain a useful tool, in the overall scheme of events.

(The writer is a specialist arbitration practitioner and a Partner (Arbitration) at a law firm. This is an opinion piece, and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)