Enforcement of Emergency Arbitration – the Challenges
1.Introduction
Institutions globally have varied thresholds for granting emergency relief. The Singapore International Arbitration Centre [“SIAC”] and the Court of Arbitration of the International Chamber of Commerce [“ICC”] have granted free reign to the emergency arbitrator to order ‘any interim relief that he deems necessary’.[1] In contrast, Hong Kong International Arbitration Centre [“HKIAC”] lays down guidelines such as ‘irreparable harm’ or ‘likelihood of success on the merits’ of the case as qualifications for relief under emergency arbitration [“EA”].[2] HKIAC’s approach is more in synch with Article 17A of the UNCITRAL Model Law, which requires similarly for issuing interim relief.[3] Such a threshold would make EA similar to an interim relief, as EA is not otherwise mentioned in the UNCITRAL Model Law.
In an arbitration proceeding, post intimation, the Respondent may choose not to participate in the proceedings, which then go on parte. In such circumstances, it is necessary that the EA proceed on ex parte basis as otherwise it would render the EA mechanism inconsequential. These ex parte awards admittedly do not fall within the strict sense of the term ex parte, however, the courts globally have scrutinised such awards to determine whether notice was adequately provided and what obligations, if any, must be discharged while sending a notice. The below discussion deals with enforcing ex parte awards and not ex parte EA awards as in the opinion of the author, there would not be a significant difference between the treatment accorded to ex parte awards and ex parte EA awards. Three decisions of the Swedish, German and English courts are considered, which arrived at varied conclusions.
2.Enforcement of EA Awards from a Global perspective
First, the Swedish Court, in the case of Lenmorniiproekt OAO v. Arne Larsson & Partner Leasing AB,[4] held that proper notification was crucial to arbitral proceedings. The award was rendered against Arne Larsson, who resisted enforcement before the Swedish Courts. The objection of Arne Larsson was that it did not receive a proper notification regarding the proceedings. However, the Russian Federation Chamber of Commerce and Industry (ICAC) that was administering the arbitration had sent the notice of arbitration to the last known address of the Respondent. The Respondent had, admittedly, failed to notify the other parties of its change of address, even though it was contractually required to do so. However, the Court noted that these objections would be immaterial as the Respondent was simply not aware of the arbitration proceedings. Thus, the Court refused enforcement. This is problematic and would give rise to a slippery slope. The Respondent may be able to sabotage the arbitration proceedings simply by a change of address, for which it has no obligation to disclose such change.[5] The idea is to showcase the latitude that courts may grant if the party is simply unaware of the proceedings.
Contrary to this view, the English High Court of Justice in the case of Bernuth Lines Ltd v. High Seas Shipping Ltd (The Eastern Navigator),[6] placed the burden on the applicant in the case to prove that proper notice was not served. On facts, the applicant in the case alleged that the arbitration proceedings had not been brought to its notice and thus the ex parte award against it must be set aside. The record showed that several emails were sent from the solicitors of the respondent in the case, the arbitrator and the London Maritime Arbitrators Association [“LMAA”], under whose Rules the arbitration was administered. The applicant in the case argued that the emails were not sent to the right person within the organisation. Further, the letters sent by the arbitrators, including the award, were dismissed by the filing staff as unsolicited, under the impression that serious legal communication would have gone through more appropriate means. Refusing the application, the Court held that the fact that emails and letters were not received by the appropriate personnel was an internal filing issue. This did not invalidate service.
A similar conclusion was reached by the German court.[7] The case concerned enforcement of an ex parte award between a charterer and the owner of the shipping vessel ordering dues to be paid under a time charter. The charterer claimed that it had received no notice of the arbitration. The charterer claimed that its director was on business throughout the year with stops in Brazil, Senegal, Tunisia and Turkey. The director did not return to office for the duration of the arbitral proceedings. The court rejected the submissions holding that it was the duty of the charterer to ensure that its interests are adequately represented in case its director is travelling.
Additionally, non-participation of the Respondent is also viewed with prejudice by the Courts. For example, the French Cour de Cassation in Yukos Capital v. Tomskneft confirmed that the burden of proof to show a breach of due process is on the non-participating party. In the case, Tomskneft contended that the arbitrator had violated due process by not notifying it of several procedural orders. Thus, it was refused an opportunity to be heard. The Court claimed that there was no obligation under the French arbitration law or under the ICC Rules for the arbitrator to keep delivery receipts of the couriers. In any case, the Court considered that the Award made specific references to postal receipts and dates. Thus, Tomskneft had not satisfied its burden that there was a violation of due process. Similarly, the Lagos Supreme Court also held that there was no violation of due process when post an unsuccessful challenge of the arbitrator, the party refused to appear in the proceedings.[8]
From the above decisions, there is a common denominator that the ex parte awards will be enforced, and the burden is on the Respondent to show a breach of due process in case the award is rendered ex parte. Drawing from the above analysis for the first and second type of ex parte EA awards and considering the views of the Courts dealing with ex parte awards, it may be possible for the Courts to refrain from interfering immediately and rather direct the Respondent to first appear before the EA for a final order.
3.Enforcement of EA Awards from an Indian perspective
The concern however with EA awards is the lack of specialised methods of enforcement. Such awards are presently being enforced either as final awards or interim awards, of whose EA awards share some characteristics, but not all. Yet, the courts have been sympathetic.
For example, in India the Arbitration and Conciliation Act, 1996 [“1996 Act”] is silent on the enforcement of foreign emergency arbitration awards. The Law Commission of India in its 246th Report[9] as well as the High-Level Committee on Arbitration[10] have both recommended that EA awards be specifically included within the 1996 Act. However, no amendments were accepted by Parliament.
The Bombay High Court was faced with the enforcement of the SIAC emergency arbitration award in the case of Avitel Post Studioz Ltd v. HSBC Pi Holdings (Mauritius) Ltd.[11] Unable to enforce the award under the 1996 Act, the Court termed the application as seeking independent interim relief and granted relief along the lines of the emergency arbitrator’s award, in effect, enforcing the EA award. The Court rejected the argument that since there was already an award of the emergency arbitrator, no more interim relief can be sought.
The Delhi High Court in the case of Raffles Design[12], accepted the above stance, yet with slightly different reasoning. The respondent raised a similar argument that the emergency arbitration award was not enforceable under the 1996 Act, which was accepted by the Court. However, Court admitted that enforcement through a ‘like’ interim application is the only method by which to enforce the award and hence accepted the application.
The position regarding enforceability of Emergency Arbitrator’s award was settled with the recent decision of the Delhi High Court in Ashwani Minda v. U-Shin Ltd.[13] Here, the applicable rules were the Japan Commercial Arbitration Association Rules [“JCAA Rules”]. Ashwani Minda contended that despite the order having been passed by the emergency arbitrator, it is open to Court under the 1996 Act to examine the issues independently and grant the relief. U-Shin’s contention was that under Article 77(5) of the JCAA Rules emergency measures are deemed to be interim measures granted by the Tribunal. There exists a doctrine of election and thus once the applicants elected to approach the Emergency Arbitrator, they cannot file an interim relief before the Delhi High Court. The emergency arbitrator had rejected the application of Ashwani Minda. The Delhi High Court refused to interfere, thereby accepting the doctrine of election. The Court would not independently apply its mind while enforcing the award of the emergency arbitrator. There is an issue in the above analysis. The Court reasoned that the JCAA Rules did not permit interference of Courts for interim relief, especially when the Claimant had opted for emergency relief under the JCAA Rules, which was rejected. However, on the flip side, had the emergency tribunal granted the relief, I argue that such a conclusion would be damaging. EA awards are not enforceable in India and are enforced as a separate interim relief, thus, if the doctrine of election is applied, it would make JCAA EA Awards unenforceable in India.
This debate was settled in December 2020, when the Delhi High Court in Future Retail v Amazon.com Investment Holdings[14] confirmed its position that EA awards will be enforceable in India. The Court reasoned that the fact that the Parliament did not accept the recommendations of the Law Commission’s report has no bearing on the interpretation of the provision under the 1996 Act. The court concluded that EA were valid under the Indian law and that the EA order constitutes an interim measure enforceable as an order of the Court under the 1996 Act.
4.Conclusion
The enforcement of ex parte EA awards will in most circumstances not meet the test under the NYC.[15] Admittedly, such awards should also not be subject to enforcement. However, that does not discount the need for such awards. Thus, to balance between the rights of the Claimant to protect its interests and that of the Respondent to present its case, the solution arrived at by the Swiss Rules of International Arbitration is worth considering. The Swiss Rules require that the Respondent immediately be granted an opportunity to present its case. Thus, the enforceability of the ex parte EA order stems from voluntary compliance pending the ‘immediate opportunity’ to the Respondent to be heard. This also ensures that the EA process is much quicker.
[1] SIAC Rules 2016, Sch 1 para 8.
[2] HKIAC Rules 2018, Article 23.4 and Schedule 4, para 11.
[3] UNCITRAL Model Law, Article 17A (a)-(b).
[4] Case No. 13-09, Swedish Supreme Court, Unofficial translation at https://newyorkconvention1958.org/index.php?lvl=notice_display&id=1548#docnum. (accessed Mar. 17, 2021)
[5] Hans Dahlberg & Marie Öhrström, Proper Notification: A Crucial Element of Arbitral Proceeding, 27:5 J. Int’l Arb. 539.
[6] [2005] EWHC 3020 (Comm)
[7] Germany, Hanseatisches Oberlandesgericht Hamburg (Higher Regional Court of Hamburg), 6 Sch 3/98, https://newyorkconvention1958.org/index.php?lvl=notice_display&id=4135&opac_view=2, (last accessed Mar. 17, 2021).
[8] L.S.D.P.C. v. Adold Stamm Int. Ltd., (1994) 7 NWLR (Pt. 358) 545.
[9] Law Commission of India, Report No. 246, Amendments to the Arbitration and Conciliation Act 1996 (2014), https://lawcommissionofindia.nic.in/reports/report246.pdf, at p. 37 (last accessed Mar. 17, 2021).
[10] Justice B. N. Srikrishna, Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India (2017), https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf, at p. 76 (last accessed Mar. 17, 2021).
[11] (2020) SCC OnLine Bom 656.
[12] Raffles Design Int’l India Pvt. Ltd. v. Educomp Professional Education Ltd., (2016) 234 DLT 349.
[13] 2020 SCC OnLine Del 721
[14] Delhi High Court, Interim Application (I.A.) No. 10376/2020, in Commercial Civil Suit (CS(Comm.)) 493 of 2020.
[15] United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 3, [“NYC”].