Interim Measures of Protection for Foreign Seated Arbitration in India

The recent amendments (Amendment 2015) brought to the Arbitration and Conciliation Act 1996 (the Act) have brought about significant changes to the arbitration laws in India. Insertion of Section 9(3) into the Act post amendment was for the purpose of reducing the role of the Court in relation to grant of interim measures once the Arbitral Tribunal has been constituted. After all, once the Tribunal is seized of the matter it is most appropriate for the Tribunal to hear all interim applications. This also appears to be the spirit of the UNCITRAL Model Law as amended in 2006.

In 2012, the Supreme Court overturned its position established in Bhatia International case through the BALCO case holding that interim relief applications cannot be filed before Indian courts in support of foreign-seated arbitrations. It was only when the Arbitration Act was amended in 2015 that the position was settled thus – parties to foreign-seated arbitrations can also obtain interim relief from Indian courts, unless there is an agreement excluding such remedy.

Interim measures granted by India-seated tribunals are automatically enforceable in India under Section 17(2) of the Act. Section 9(3) of the Act is expressly relatable to India-seated arbitrations, as evidenced by the reference to Section 17 of the Act, but the principle enshrined in it is equally applicable when interim measures are sought in the Indian courts in connection with a foreign-seated arbitration.

Resolution of disputes by a tribunal of the parties’ choice, and reduced interference by courts, are amongst the central features of arbitration. Section 9(3) of the Act reflects that understanding, and manifests a legislative preference that the grant of interim measures ought to be considered by the arbitral tribunal, once constituted, rather than by the courts. It is only when the remedy before the tribunal lacks efficacy that a party can seek interim measures from the court under Section 9.

The primary purpose of Part I of the Act (which includes Section 2, 9 and 17) is to govern India-seated arbitrations. The reference in Section 9(3) to Section 17 alone, cannot therefore be dispositive of the question as to whether the same principle applies where the arbitration is seated outside India. The absence of a specific reference to foreign-seated arbitrations in Section 9(3) ought not to be construed as a widening of the Section 9 power, to cover cases where the arbitral tribunal has been constituted, and is capable of granting efficacious relief. Such an interpretation would not just extend the scope of Section 9, but would amount to the provision being available in the Indian courts in connection with foreign-seated arbitrations, but not in connection with India-seated arbitrations.

Although an application under Section 9 is maintainable in connection with a foreign-seated arbitration, an application thereunder would not lie after the constitution of the arbitral tribunal, unless the applicant demonstrates that it does not have an efficacious remedy before the tribunal. When the Courts are determining such issues, they give emphasis to the question as to whether the remedy before the arbitral tribunal would be efficacious or not. This caveat is incorporated in Section 9(3) also, and would turn upon the facts and circumstances of each case, including the amplitude of the power conferred upon the arbitral tribunal. In making this assessment, the manner in which the applicant has framed the relief sought cannot be determinative.

 

In order to understand the impact of the Amendment   Act   2015   on   the   international commercial   arbitrations   seated   outside   India governed by foreign law, it is necessary to know the legal position as to the law on ‘implied exclusion’.

In a recent judgment by the Madras High Court, it was held that in a Pre-BALCO Arbitration Agreement, even though the parties have expressly chosen foreign law to be applicable to the main contract, foreign law governing the arbitration agreement and seat of arbitration in a foreign   country, if the parties had expressly agreed by inserting a provision that for interim measures they can approach the Indian Courts, the provision of providing Indian courts with supervisory jurisdiction over the arbitration proceedings empowering it to pass interim measures for the same is valid and would prevail. Thus, as the parties have expressly included and made applicable Section 9 of the Act to the said arbitration, implied exclusion principle shall not apply in such a scenario.

The Supreme Court in another judgment in Videocon Industries Ltd. v. Union of India, where the parties had agreed that the arbitration agreement   would   be   governed   by   the   laws   of England, while the seat of arbitration was at Kuala Lumpur, and the governing law of the contract was Indian law. The Supreme Court held that since the   parties   had   agreed   that   the   arbitration agreement   shall   be   governed   by   the   laws   of England, this necessarily imply that the parties had agreed to exclude the provisions of PART I of the Act, and the Delhi High Court would not have jurisdiction to entertain the petition under Section 9 and Section 34 of the 1996 Act. It was held that an   Indian   court   did   not   have   jurisdiction   to entertain   such   a   challenge,   as   the   parties   had “impliedly excluded” the provisions of PART I of the Act from being applicable to foreign seated arbitration,   since   the   governing   law   of   the arbitration was English law.

Doctrine of Election in Arbitration Law:

The Doctrine of Election is a branch of the rule of Estoppel. It means that when several remedies are available to a litigant arising out of the same transaction, the aggrieved party can choose either of them, but not both.

After the amendment of Section 2(2), a party to a foreign-seated arbitration has the option of seeking interim measures of protection in the Indian courts, or of going to the seat court or the tribunal for interim relief. If a party has chosen to go to an emergency arbitrator, and having failed in its endeavour to obtain interim relief, the party can then seek the self-same relief in Section 9 proceedings. Neither a purposive interpretation nor the legislative history of the 2015 Amendment reveal an intention to permit such a course. The legislative intent was to provide an efficacious alternative means for seeking relief in the Indian courts, where the arbitral tribunal is either not constituted or otherwise unable to grant efficacious relief. Having chosen the tribunal, the seat, the applicable rules and the forum from which to seek interim measures, the parties cannot revise that choice.

The concept of Emergency arbitrator was first envisaged in the SIAC arbitration rules in 2010. The basic purpose of an emergency arbitrator or tribunal is to adjudicate on urgent interim relief which the parties seek, and which cannot wait for the formal appointment of a sole arbitrator or arbitral tribunal. Emergency applications have now increasingly become a commonplace feature in all arbitral institutions and usually the reliefs which are sought through emergency arbitration are in the nature of preservation orders, freezing orders, Mareva injunctions and general injunctive relief. Indian Arbitral institutions like the Indian Council of Arbitration and Delhi International Arbitration centre also have provisions for emergency arbitrations in their rules.