The deeper learnings from the RIL Future Amazon retail battle
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The grand battle in retail - Future Retail Vs Amazon
- The story: In August 2021, the Supreme Court upheld the enforcement of an order by the Singapore International Arbitration Centre (SIAC)’s emergency arbitrator that put on hold the Future Group’s deal with Reliance Industries Limited (RIL). It was a rare event, when RIL lost a case in Indian judicial system!
- SIAC: The Singapore International Arbitration Centre is a not-for-profit international arbitration organisation based in Singapore, administering arbitrations under its own rules of arbitration and the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.
- What happened: In August 2020, Future Retail Limited (FRL) had announced that it would sell its retail and wholesale business to Reliance Retail. Future was crushed due to the sudden drop in footfalls due to the pandemic, and being heavily leveraged at that time. Before the deal could be executed, Amazon objected to it, alleging a breach of contract it had with Future Coupons (the promoter firm of Future Retail).
- Amazon (of Jeff Bezos) said that its agreement with Future Coupons had given it a “call” option, which enabled it to exercise the option of acquiring all or part of Future Retail’s shareholding in the company, within three to 10 years of the agreement.
- Subsequently, Amazon took Future Retail into Emergency Arbitration before the SIAC, where an emergency arbitrator barred the latter from proceeding with the deal.
- Emergency arbitration: It is a mechanism which "allows a disputing party to apply for urgent interim relief before an arbitration tribunal has been formally constituted".
- Supreme Court’s Order: It dismissed FRL’s argument that the “Emergency Arbitrator is not an arbitral tribunal” under the Arbitration and Conciliation Act of 1996, and upheld the validity of the EA award. The judgment laid down that the award is “exactly like an order of an arbitral tribunal” contemplated under Section 17 of the 1996 Act. Hence, an award by the EA was like an order under Section 17(1) (interim measures ordered by an arbitral tribunal) of the Act.
- Section 17 of the Act prescribes the mechanism for parties to an arbitration to seek interim reliefs from the arbitral tribunal during the pendency of the arbitral proceedings.
- The EA orders were “an important step in aid of decongesting the civil courts and affording expeditious interim relief to the parties”.
- The court pointed out a recommendation that a High-Level Committee constituted by the Government of India under the chairmanship of Justice B N Srikrishna (retd) to review the institutionalisation of the arbitration mechanism in India and look into the provisions of the Arbitration Act after the 2015 Amendment Act, gave in its 2017 report.
- It said that “given that international practice is in favour of enforcing emergency awards (Singapore, Hong Kong and the United Kingdom all permit enforcement of emergency awards), it is time that India permitted the enforcement of emergency awards in all arbitral proceedings”.
- The judgment would serve as a reminder to the parties to carefully agree to the terms and conditions of the arbitration. No appeal would lie under Section 37 of the Arbitration Act against an order of enforcement of an Emergency Arbitrator’s order made under Section 17(2) of the Act. [Section 37 of the Arbitration Act, prescribes for appeals against certain identified orders of the court and/or arbitral tribunal (as the case may be).]
- Arbitration: It is a process where disputes are resolved between the parties by appointing an independent third party who is an impartial and neutral person called arbitrator. Arbitrators hear both the parties before arriving at a solution to their dispute.
- Arbitration and Conciliation (Amendment) Act, 2021: It amended the Arbitration and Conciliation Act (A&C Act 1996) so as to (i) enable automatic stay on awards in certain cases and (ii) specify by regulations the qualifications, experience and norms for accreditation of arbitrators. The A&C Act 1996 was an to amend and consolidate a law related to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental therewith.
- 8. Summary: India already lags behind when it comes to the enforcement of international contracts and agreements. The Act can further hamper the spirit of Make in India campaign and deteriorate rankings in Ease of Doing Business Index. India aims to become a hub of domestic and international arbitration. Through the implementation of these legislative changes, resolution of commercial disputes could take longer duration now onwards.
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