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THINGS TO KNOW ABOUT EMERGENCY ARBITRATION
What do we understand by the term:
In the ever-evolving landscape of dispute resolution, emergency arbitration has emerged as a crucial mechanism for parties to obtain urgent interim relief before the formal constitution of an arbitral tribunal. This article delves into the status of emergency arbitration both internationally and in India, its potential benefits, and its distinctions from interim relief under the Arbitration Act.
The concept of emergency arbitration has evolved from the world of dispute resolution through the process of arbitration, as we know that arbitration or any other mode of ADR (alternative dispute resolution) was introduced to reduce time consuming and cost consuming litigations from the courts and enable the parties in dispute to opt a different mechanism outside the courtand resolve their matters to save their precious time and money.
But what is the reason or need for having another mode of resolving disputes while the other ADR methods are already there?
Although there is no specific provision or definition given under any statute for the term “EMERGENCY ARBITRATION”, be it the Arbitration & Conciliation Act, 1996 or any other one.
IS IT BENEFICIAL FOR THE PARTIES IN DISPUTE:
The adoption of emergency arbitration offers several benefits to parties engaged in arbitration proceedings:
Emergency arbitration offers several advantages to parties involved in arbitration proceedings. Firstly, it provides a swift and efficient means of obtaining interim relief before the constitution of the arbitral tribunal. This can be particularly beneficial in cases where time is of the essence, such as disputes involving asset preservation or injunctive relief.
Secondly, emergency arbitration allows parties to maintain confidentiality, as proceedings are conducted privately before a designated emergency arbitrator, rather than in open court. This confidentiality is crucial for safeguarding sensitive commercial information and preserving the parties' reputations.
Thirdly, emergency arbitration affords parties greater autonomy and flexibility in resolving urgent disputes. Parties have the freedom to select the emergency arbitrator, define the scope of relief sought, and expedite the resolution process according to their specific needs and timelines.
STATUS OF EMERGENCY ARBITRATION IN INDIA:
After the infamous judgement passed by the Hon’ble Supreme Court in the case of “Amazon v. Future Case”, the term Emergency arbitration came into discussion throughout the nation, whether it would be a good option where there is a large stake and companies with good reputation are involved.
In India, the legal landscape surrounding emergency arbitration has witnessed significant developments in recent years. Although the Arbitration and Conciliation Act of 1996 did not expressly provide for emergency arbitration, the Supreme Court of India, in the landmark case of “Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc”., recognized the concept under Indian law.
The Supreme Court's recognition of emergency arbitration laid the groundwork for its adoption and integration into institutional arbitration rules in India. Arbitral institutions such as the Mumbai Centre for International Arbitration (MCIA) and the Delhi International Arbitration Centre (DIAC) have subsequently incorporated provisions for emergency arbitration into their rules, offering parties a structured framework for seeking urgent relief.
STATUS IN FOREIGN JURISDICTIONS:
Internationally, emergency arbitration has garnered widespread recognition and acceptance as an effective tool for addressing urgent disputes. Many jurisdictions have incorporated provisions for emergency arbitration into their arbitration laws or institutional rules. For example, countries like the United States, United Kingdom, Singapore, and Switzerland have embraced emergency arbitration, outlining procedures for initiating emergency proceedings, delineating the powers of emergency arbitrators, and establishing mechanisms for enforcing emergency awards.
The prevalence of emergency arbitration provisions in foreign jurisdictions underscores its significance in facilitating timely and efficient resolution of disputes, particularly in scenarios where immediate relief is necessary to prevent irreparable harm or prejudice to parties.
HOW IS IT DIFFERENT FROM INTERIM RELIEF:
When Interim relief under Section 9 is already there, then what makes one to go for the emergency arbitration process.
While emergency arbitration and interim relief under the Arbitration Act serve similar purposes of providing interim relief pending the final resolution of a dispute, they differ in several key aspects.
Emergency arbitration occurs before the constitution of the arbitral tribunal, enabling parties to obtain urgent relief without waiting for the full arbitral process to commence. In contrast, interim relief under the Arbitration Act is sought after the tribunal has been constituted and is subject to its jurisdiction.
Furthermore, emergency arbitration is typically invoked in situations where immediate relief is necessary to prevent irreparable harm or prejudice. In contrast, interim relief under the Arbitration Act may encompass a broader range of interim measures and is subject to the procedural requirements stipulated in the Act.
LET’S LEARN FROM AN EXAMPLE:
Let's say Company X, a multinational corporation with operations in various countries, enters into a complex international construction contract to build a major infrastructure project in a developing country. Midway through the project, a dispute arises between Company X and the local construction contractor regarding the quality of materials used and delays in project completion.
Due to the urgency of the situation and the potential for significant financial losses, Company X initiates emergency arbitration proceedings under the arbitration clause in the contract. An emergency arbitrator is appointed promptly, and hearings are held within days to address the urgent issues, such as ordering interim measures to halt the use of substandard materials or to expedite the completion of critical project milestones.
Emergency arbitration allows Company X to obtain immediate relief to mitigate further damages and ensure the project's successful completion while avoiding the delays associated with traditional arbitration proceedings. This real-life scenario illustrates how emergency arbitration can be crucial for multinational companies operating in complex international environments.
COMMENTS BY THE COURTS:
- Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, Inc. was a significant case in the field of international arbitration. The case involved a dispute between an Indian company (Bharat Aluminium Co.) and an American company (Kaiser Aluminium Technical Services) regarding alleged breaches of contract.
One of the key aspects of this case was the use of emergency arbitration, where parties sought urgent relief from an arbitral tribunal even before the constitution of the full arbitral tribunal. This case highlighted the importance of emergency arbitration procedures in providing swift and effective interim relief to parties in arbitration proceedings.
- The Amazon vs. Future case involves a legal dispute over the acquisition of a stake in Future Retail by Reliance Industries. Amazon had raised objections to this deal, claiming that it violated a non-compete agreement it had with Future Group. As a result, Amazon initiated arbitration proceedings.
In October 2020, an emergency arbitrator appointed by the Singapore International Arbitration Centre (SIAC) ruled in favour of Amazon, temporarily halting the Future-Reliance deal. Future Group, however, contested the emergency arbitrator's ruling in Indian courts.
In February 2021, the Delhi High Court upheld the emergency arbitrator's award and ruled that the Future-Reliance deal should be put on hold. Future Group then filed an appeal against this decision to the Supreme Court of India.
In August 2021, the Supreme Court of India pronounced its verdict in the case, upholding the emergency arbitrator's award and ruling that the Future-Reliance deal cannot proceed. The court stated that the emergency arbitrator's order was enforceable under Indian law and that parties cannot be allowed to bypass arbitration agreements.
CONCLUSION:
In conclusion, emergency arbitration represents a valuable mechanism for parties engaged in arbitration proceedings, offering a swift, confidential, and flexible means of obtaining urgent relief. Its recognition and adoption both internationally and in India signify its growing importance in the realm of dispute resolution, providing parties with an expedited alternative to traditional court proceedings.
Emergency arbitration plays a vital role in providing parties with an efficient and effective mechanism for addressing urgent disputes. While its status may vary across jurisdictions, its benefits are undeniable, making it a valuable tool within the judicial system. As countries continue to embrace alternative dispute resolution mechanisms, the importance of emergency arbitration is likely to grow, offering parties a means of navigating complex disputes with agility and confidence.