Efficacy of interim protection in Foreign seated arbitrations – An Indian perspective

Although the Arbitration and Conciliation Act, 1996, prescribes a wholesome and complete code for the enforcement of foreign arbitral awards, it is conspicuously silent on the enforcement of interim measures which may be granted in an arbitration seated outside India...

Myriad commentators have defined international arbitration differently. And whilst each definition has its own well-reasoned scope and rationale, the common central theme is the enforceability of the decision/order of the arbitral tribunal. Practically, the other widely accepted (and necessary) characteristics of arbitration, including consensus, neutrality, and finality, whilst central to the concept of arbitration, must yield to enforceability. At the end of the day, what is the use of a well-reasoned order/award by a neutral adjudicating authority, appointed by the consent of parties, and passed in accordance with fair adjudicatory procedures on issues/disputes submitted by the parties, if the order/award is unenforceable and thus not worth the paper it is printed on?

The requirement of enforceability attaches at two stages, namely, at the time of passing of interim measures of protection, and at the time of passing of an interim or final award. Parties to arbitral proceedings are normally entitled to seek interim measures of protection, both prior to and during the arbitral proceedings, as also after an award is passed, but before the same is enforced. In India-seated arbitrations, parties may approach the relevant jurisdictional court under Section 9 of the Arbitration and Conciliation Act, 1996 ("Act") or the arbitral tribunal under Section 17 of the Act, for interim protection. Interim measures under Section 17 of the Act may be sought during the arbitral proceedings or at any time after making the award, but before it is enforced in accordance with Section 36 of the Act, whilst interim measures under Section 9 of the Act may be sought even before the arbitral proceedings commence. An order passed by an arbitral tribunal in an India-seated arbitration, granting interim measures, is enforceable in the same manner as if it were an order of a court.¹

Parties to a foreign seated arbitration, where the award made or to be made pursuant to such arbitration is enforceable and recognized under Part II of the Act (inter alia awards governed by the 1958 New York Convention),may also seek interim measures in India under Section 9 of the Act, unless they have agreed to the contrary.²

Certain institutional rules, including those of the International Chamber of Commerce ("ICC"), Singapore International Arbitration Centre ("SIAC") and Hong Kong International Arbitration Centre ("HKIAC") provide parties with the option of seeking emergency relief prior to the constitution of the arbitral tribunal.³ This involves appointment of an emergency arbitrator, by the institution, to hear and decide an application for emergency relief. Emergency measures have gained popularity as they can be availed prior to the constitution of the arbitral tribunal, the only other recourse previously being to approach a jurisdictional national court for interim measures, pre-constitution.

Enforcement of interim measures granted by foreign seated arbitral tribunals

Although the Act prescribes a wholesome and complete code for the enforcement of foreign arbitral awards, it is conspicuously silent on the enforcement of interim measures (whether passed by an emergency arbitrator or arbitral tribunal), which may be granted in an arbitration seated outside India. Judicial precedent in relation to the treatment of emergency orders/awards passed in foreign seated arbitrations, in Indian courts, is scarce. Some, which we found relevant, are briefly discussed below.

In HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studioz Limited,⁴ the agreement between the parties provided for arbitration seated at Singapore, in accordance with the SIAC Rules, with Indian law governing the agreement itself. Section 9 of the Act was expressly made applicable. The Bombay High Court granted interim relief to a party, which was similar to the relief granted by an emergency arbitrator.In appeal, the Division Bench of the Bombay High Court inter alia upheld the Single Judge's findings. An appeal against the Division Bench's judgment was admitted by the Supreme Court in 2016 and is presently pending.⁵

Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd.⁶ was a case where the parties had designated Singapore as the seat of arbitration, SIAC Rules for conduct of the arbitration and Singapore law as substantive law. The petitioners obtained reliefs from an emergency arbitrator appointed by the SIAC, in the form of an emergency award. The court found an application under Section 9 of the Act, for similar reliefs, to be maintainable, given that the SIAC Rules contemplate that a request for interim relief made by a party, to a judicial authority, would not be incompatible with the SIAC Rules. The court also held that a party seeking interim measures (under Section 9 of the Act) cannot be precluded from doing so only because it obtained a similar order from an arbitral tribunal, and the court can apply its mind independently and grant interim reliefs under Section 9 of the Act, where it is warranted.

The Delhi High Court took a different view in Ashwani Minda v U-Shin Ltd,⁷ when faced with a situation where the applicant's request for emergency measures was denied by the emergency arbitrator, and the petitioner then approached the court for similar reliefs under Section 9 of the Act. The agreement provided for arbitration in Japan under the Rules of the Japan Commercial Arbitration Association (hereinafter referred to as "JCAA Rules"). Noting that the JCAA Rules provide for a detailed mechanism for seeking interim and emergency measures, which was known to the parties when entering into the agreement, the court found that this clearly evinced the intention of the parties to exclude the applicability of Part I of the Act and declined to exercise jurisdiction. An appeal against this judgment is presently pending before a Division Bench of the Delhi High Court.

Concluding remarks

It is clear that the Act does not allow or even contemplate enforcement of emergency awards or interim measures of protection, passed by foreign seated arbitral tribunals. This is specifically perplexing, given that Articles 17H and 17I of the UNCITRAL Model Law on International Commercial Arbitration (as amended in 2006) inter alia provide for recognition and enforcement (and grounds for refusal thereof) by the competent court, of an interim measure issued by an arbitral tribunal, irrespective of the country in which it was issued.

Interestingly, prior to the amendment of the Act in 2015, interim measures of protection passed by an arbitral tribunal under Section 17 of the Act were not legislatively enforceable. The scheme of things apparently relied upon parties to an arbitration being compliant. But given that this is seldom the case, the courts had no option but to step up and cover this obvious gap in the law, through judicial creativity. Some of the ways that a court would give effect to an order passed under Section 17 of the Act,were either by (i) passing a similar order under Section 9 of the Act⁸; or (ii) taking the contempt route by invoking Section 27 (5) of the Act.⁹ All this became redundant post the amendment of the Act in 2015, which, by legislative fiction, equated an order passed by the arbitral tribunal under Section 17 of the Act, with an order of the court.  

However, inexplicably, a similar olive branch was not offered insofar as interim measures passed by foreign seated arbitral tribunals were concerned. This quagmire again did not find any redress in the amendments to the Act in 2019. Faced with this situation, the courts in India had to rise to the challenge again, to ensure that justice is done, and seen to be done.

Now, though the view in Raffles Design (supra) appears to be progressive and preferable at first blush, if a court is required to (or chooses to) apply its mind independently to an application for interim reliefs, despite an order or award in this regard already having been passed by an arbitrator (emergency or otherwise), this could inter alia lead to issues of conflicting decisions, constructive res judicata and issue estoppel. On the other hand, the Ashwani Minda (supra) view unreasonably stretches the scope of the "agreement to the contrary", contemplated in Section 2(2) of the Act, by effectively holding that if the designated institutional rules in a foreign seated arbitration do not positively contemplate approaching courts for interim measures, then the parties are deemed to have agreed to exclude Section 9 of the Act. Granted that the Act does provide that a reference in Part I to an agreement of the parties shall include any arbitration rules referred to in that agreement,¹⁰ however, the aforesaid view may be considered short-sighted, nonetheless.

Allow us to be clear, we are in no way suggesting that the court did not do justice, given the facts presented before it, in either of the aforesaid cases. We are pointing to the lack of a legislative path for the courts to tread in such a situation, and the resulting confusion where each court takes its own path or view to do justice, based on the facts before it.

Having said that, the position that emerges from the decisions referred to above, in relation to arbitrations seated outside India, is that (a) a party can seek interim reliefs, similar to those granted by a foreign seated tribunal in an emergency award or other interim measure of protection, by filing a petition under Section 9 of the Act, subject to an agreement to the contrary; (b) if the institutional rules designated in the agreement do not contemplate that the parties can approach the courts for interim relief, then the party approaching an Indian court may be denied relief on the ground that this is an implied agreement between the parties to exclude the applicability of Section 9 of the Act; and (c) where a party's request for emergency relief has been denied by an emergency arbitrator, Indian courts may not be inclined to grant interim measures independently.

Until the Parliament decides to plug this legislative gap, parties who intend to arbitrate the differences arising between them in a foreign seated arbitration, where the assets of either party are in India (and accordingly, who foresee a need to approach Indian courts for interim measures), may mitigate the degree of uncertainty to some extent by (a) specifying in the arbitration clause that Section 9 of the Act shall apply in relation to any arbitral proceedings between the parties; and/or (b) choosing institutional rules, which specifically provide that parties may approach national courts for interim measures (or at least caveat the choice of such rules as not affecting the rights of the parties to approach Indian courts under Section 9 of the Act).