Future Group vs Amazon: The 5 big legal hurdles

While Amazon is expected to approach either Mumbai or Delhi high court to enforce the interim order of SIAC, the Future Group, too, is likely to challenge the order. Legal experts also expect the Reliance group to expedite the process for regulatory clearances in the deal.

The legal battle for Future group’s retail business seems to be headed for the Indian shores.

This follows an interim order by Singapore International Arbitration Centre (SIAC) to put the Rs 27,000 crore retail deal between Reliance Industries and Future Group on hold.

Experts share their insights on the enforceability of this order in India and the legal options before the players, namely Future Group, Amazon and Reliance Retail.

What are the legal challenges in the enforcement of an interim international arbitration order?

India is a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

This provides for enforcement and recognition of foreign awards in India.

However, the recognition only applies to final awards passed by foreign arbitral tribunals.

In the legal tussle between Future Group and Amazon, the order passed by the emergency arbitrator is an interim order of injunction.

Experts point out that the Indian Arbitration Act does not recognise foreign interim orders.

“However, it is open for parties to apply for interim reliefs in India under Section 9 of the Indian Arbitration Act in foreign-seated arbitration, unless there is an agreement to the contrary,” says Amit Jajoo, partner in law firm IndusLaw.

Murli Neelakantan, a corporate lawyer, points out that enforcement of this injunction by the emergency arbitrator in Singapore will require a high court in India to confirm it, after a hearing under Section 9 of the Act.

How legally tenable is Future Retail’s claim that it is not a party to the agreement under which Amazon has invoked arbitration proceedings, and therefore the deal between Future Group and Reliance Retail cannot be held back by arbitration proceedings?

Lawyers note that the enforceability of an emergency arbitrator’s order depends on the facts of the case and the shareholders’ agreement under which the arbitration is initiated.

“It is to be tested whether Future Retail, which claims to not be a party to the agreement, is bound by the negative covenants placed in the agreement between Future Coupons and Amazon,” says Jajoo.

So, what is the likely course of action for Future Group, keeping in mind that it does not violate the interim arbitration order?

Future Group has the legal option of challenging the interim order passed by the emergency arbitrator, say experts.

“If the jurisdiction lies in India (as Future Group claims), then the order can be assailed under Section 37 of Indian Arbitration Act.

"If the said order is passed in a foreign-seated arbitration, then the order can be challenged under the domestic laws of that country,” says Jajoo.

Can Amazon challenge the deal before the Competition Commission of India (CCI) or the National Company Law Tribunal (NCLT) when it heads for regulatory clearances?

Experts say Amazon would first have to prove its locus standi, which will be a huge hurdle since it is not a shareholder in any of the parties in the case to be able to challenge the Future Group-Reliance Retail deal in the NCLT.

They add that although Amazon does not seem to have the right to create hindrances before CCI/NCLT and other forums, the interim order could pose a challenge to the deal before these regulatory forums.

So, what is likely to be the next course of action in this case?

While Amazon is expected to approach either Mumbai or Delhi high courts to enforce the interim order of SIAC, the Future Group, too, is likely to challenge the order.

A panel of arbitrators would be appointed by both the parties if they are to pursue the matter in SIAC.

Legal experts also expect the Reliance group to expedite the process for regulatory clearances in the deal.

Photograph: Courtesy, Business Standard