Emergency arbitration has been in the spotlight in India recently through Indian low-cost airline Go Airline which is trying to enforce an emergency arbitration award against US engine manufacturer Pratt & Whitney even as a court committed it to voluntary insolvency on 10 May 2023.
The airline claims that faulty engines supplied by the US company have caused the grounding of half of its fleet. It said that it was filing for insolvency to prevent the repossession of aircraft leased to it, and at the same time is seeking to enforce the award against Pratt & Whitney.
But as seems to be the case with emergency arbitration, winning the award is not the end of the battle- the key challenge is enforcing it.
An emergency arbitration is a relatively recent procedural innovation. Put simply, an emergency arbitration is a way for a party to an arbitration agreement to obtain protective relief even before an arbitral tribunal is constituted. A party can appoint an ‘emergency arbitrator,’ who can grant relief which is so urgent that it cannot wait until a tribunal is formally constituted under the arbitration agreement. Most arbitral institutions now contain provisions that allow parties to appoint an emergency arbitrator for urgent or emergent protective measures. Each institution has its own rules that govern the mechanics of such a situation.
When to use emergency arbitration
The protective measures that an emergency arbitrator can grant are limited in time, and typically lapse once the tribunal is constituted. The situations these can be used in are often practical and very commercially driven. For instance, in the case of Go Airlines, the airline company asked that Pratt & Whitney provide and repair engines so that the airline’s operations would not be grounded. The emergency arbitrator ruled in favour of Go Airlines, and asked Pratt & Whitney to dispatch at least ten engines within 28 days, and ten every month until the end of the year, according to media reports. Go Airlines has since said that Pratt & Whitney has not complied with this award, forcing it to go to a court in the United States to enforce the award. Go Airlines also says that this failure on Pratt & Whitney’s part has forced it into insolvency as it cannot replace its grounded engines.
The saga is illustrative. How do you make an emergency award more than just a decree on a piece of paper?
In India, the question is vexed. India-seated arbitrations are governed by Part I of the Indian Arbitration & Conciliation Act, 1996 (“Arbitration Act”). However, some portions of Part I of the Arbitration Act, such as asking an Indian court for interim relief, are also available in foreign-seated arbitrations, as long as parties have not agreed to exclude Part I as part of their arbitration agreement.
Under Part I of the Arbitration Act, an interim award passed by an arbitral tribunal is enforceable as if it were an order passed by a court. The Supreme Court of India ruled in Amazon.com NV v. Future Retail that an emergency arbitrator’s award is enforceable just like any other award on interim relief passed by an arbitral tribunal.
Enforcing awards outside India
Where the water gets murky is enforcing an emergency arbitrator’s award in a foreign-seated arbitration. Foreign-seated arbitrations are governed by Part II of the Arbitration Act. Part II only provides for enforcement of final arbitral awards and does not provide a mechanism to enforce an interim award, or an emergency arbitrator’s award.
One way around this is to file a suit before an Indian court and ask for protective measures against the Indian counterparty based on the emergency arbitrator’s order. This is however a long-drawn process, subject to the well-known infrastructural and timeline challenges around litigating in Indian courts.
A second option is to ask for interim relief from an Indian court under Part I of the Act. The Delhi High Court considered the issue in Raffles Design International v. Educomp Professional Education, a case where an emergency arbitrator in a Singapore-seated arbitration granted an order that Raffles sought to enforce using Part I of the Arbitration Act. The court said that it could not enforce a foreign-seated emergency arbitrator’s award. However, it did find a workaround, and said that it could independently grant interim relief since the parties had not contracted to exclude Part I’s applicability to a foreign-seated arbitration.
The Bombay High Court adopted a similar approach in HSBC PI Holding v. Avitel Post Studio, where a party in a Singapore-seated arbitration asked a court to provide interim relief under Part I of the Arbitration Act. The counterparty opposed this, saying that this was simply a device to enforce an emergency arbitrator’s award. The court however said that the proceedings were independent of the emergency arbitrator’s award, and independently granted the same interim relief that the emergency arbitrator had awarded.
A third as-yet untested route is Section 27(5) of the Arbitration Act, which allows a court to find a party guilty of contempt of court and subject to consequent penalty if it fails to comply with an arbitrator’s order. In Alka Chandewari v Shamshul Ishrar Khan, the Supreme Court said that penalties under Section 27(5) would cover non-compliance with an interim order passed by an arbitral tribunal. Section 27(5) applies to both India- and foreign-seated arbitrations, and court jurisprudence recognises an emergency arbitrator’s award as an interim order by a tribunal.
Until the legislature explicitly solves the problem of enforcing emergency arbitrator awards in foreign seated arbitrations, parties will need to adopt creative lawyering and careful arbitration agreement drafting.