Amazon urges Sebi to consider Singapore arbitrator's stay order on RIL-Future deal7 min read . Updated: 29 Oct 2020, 07:26 PM IST
The RIL-Future deal is subject to regulatory approvals from Sebi, exchanges, CCI and other authorities
Mumbai: Seattle-based retail giant Amazon.com Inc. has written to India's market regulator, asking it to consider the interim judgement of the Singapore International Arbitration Centre or SIAC, which has restrained the Future Group from going ahead with the ₹24,713 share sale deal or any such agreement with Mukesh Ambani promoted Reliance Industries Ltd. and other "restricted parties" as mentioned in the non-compete clause signed between Amazon and Future Coupons Pvt. Ltd. in 2019.
Two persons familiar with the development confirmed this.
The RIL-Future deal is subject to regulatory approvals from the Securities and Exchange Board of India or Sebi, exchanges, Competition Commission of India and other authorities.
"Technically, since an arbitration is not self-enforceable without the endorsement of a court of law, it will be important that Sebi and other regulators do consider the international arbitral award before clearing the deal or at least make the deal conditional on the arbitration panel's clearance or a clearance from a high court or the Supreme Court," said the first person.
Emails sent to Amazon and Sebi remained unanswered.
"SIAC's final judgement may take time and will happen only if Amazon and Future Group mutual decide to appoint an arbitration panel and continue with the arbitration proceedings at SIAC. Filing writs in the court, completion of hearings and the court's judgement may take even more time. Meanwhile, it is important that Sebi or any regulatory authority in India does not give an unconditional green signal to the RIL-Future deal, otherwise the whole arbitration process will become futile. Not only that, in any deal going forward between an Indian and foreign company, the value of such mutual agreements with non-compete clauses, subjecting agreements to arbitration syatems, dispute resolution mechanisms etc. will become meaningless, which is not desirable for any jurisdiction," said the first person.
Amazon, basically,wants to buy more time to arrive at a decision over the recently announced deal between RIL and the associate firm of Amazon's partner Future Coupons Pvt. Ltd. in which Amazon had bought 49% for Rs. 1430 crore in 2019.
Amazon and Kishore Biyani-promoted Future Group could be in for an unprecedented and long-drawn legal tussle if the two companies fail to mutually agree within next week to continue with the arbitration proceedings at the SIAC over the alleged breach of non-compete clause by Future Group in its Rs. 24,713 crore asset sale deal with Reliance Industries Ltd.
If Future Group agrees with SIAC’s interim ruling and pause on the RIL deal then both Amazon and Future Group can mutually decide on the members of the arbitration panel, continue the hearings at SIAC and wait for the panel’s judgement. The final judgement could go in favour of Future Group or Amazon. f
However, if such a mutual agreement is not arrived upon, the only option could be approaching an Indian court if Future Group is dissatisfied with SIAC ruling or is unwilling to reopen investment discussions with Amazon for bringing in a new partner or investor, while calling off the deal with RIL.
On Sunday, in an interim relief to Amazon, SIAC restrained Future Group from selling its retail business to Asia’s richest man Mukesh Ambani-owned RIL’s retail arm for ₹24,713 crore.
Amazon had filed an emergency arbitration at SIAC, claiming that Future Group violated the non-compete clause in its 2019 agreement with Amazon, when Amazon had bought a 49% stake in Future Coupons Pvt. Ltd. for Rs. 1430 crore, which gave Amazon a 5% stake in Future Retail Ltd.
The Amazon-Future agreement barred FCPL and its promoters from selling any stake or forging any alliance specifically with RIL, among 30 other entities in the retail space, without Amazon’s consent.
With the first round of legal fight going to Amazon, the three retail giants are bracing for a twisted journey.
To ensure that the arbitration is enforceable in India Amazon is currently exploring which writ jurisdiction to approach. At this juncture the two Indian parties RIL and Future may raise their objections
“The most effective option for Amazon is to file a section 9 application under the arbitration act in any of the high courts where any of the Future Group or Reliance Group entities is registered - potentially Delhi, Mumbai or Gujarat. If Amazon gets the same interim relief granted to it by the SIAC in the high court and then the Supreme Court, the SIAC arbitration will proceed on merits. However, the other parties namely - Future group and RIL are likely to contest this vigorously at every stage," said Murali Neelakantan, Principal Lawyer, Amicus, a law firm
Section 9 of the Arbitration and Conciliation Act, permits interim measures for relief by way of an interim application before the commencement of the arbitral proceedings or after the pronouncement of award but before its enforcement
The less travelled road involves Amazon filing a suit in one of the high courts.
“But this would be unlikely as that is not as effective as a s.9 process and there is even a recent Supreme Court ruling that has established a clear path to be followed in international arbitration cases," added Neelkantan.
Amazon is likely to move this application sometime this week or early next week as the RIL-Future deal is already being scrutinized by Competition Commission of India (CCI) and the next step would be the acquisition petition in National Company Law Tribunal (NCLT), said a third person aware of the matter.
"Amazon would need to move fairly quickly and press for a similar interim relief because things are moving on RIL-Future deal even as we speak. Until and unless an Indian court does not issue directions to either RIL or Future on the deal the arbitration ruling is not enforceable," said this third person.
The matter would ultimately need to be adjudicated by the Supreme Court unless the parties arrive at a settlement and withdraw the legal proceedings, this person added.
“Future Retail alone may either independently file a case before a high court, making RIL a party. Future Group needs to approach an Indian high court if it wants the SIAC ruling to be set aside or if it wants to stop Amazon from filing any case if it chooses to go ahead with the RIL deal despite the SIAC ruling," said the first person.
Amazon too could immediately rush to an Indian court to get a legal validation on the SIAC ruling so that Future Group and RIL both are restrained from entering any deal until the final SIAC judgement comes.
Neerav Merchant, partner, Majmudar and Partners said,"One will also have to assess the remedies that RIL might have against the Future Group for causing any inordinate delays in closing the deal."
“Arbitral awards are typically not self-enforceable. Hence, the award recipient (Amazon in this case) would consider to approach the competent court in India for enforcement of the interim foreign award. Future Group may be checking for validation grounds (if any) available to challenge, or set aside the emergency Arbitrator's award. Ideally, such challenge has to be made before the competent court situated at the seat of arbitration, namely, Singapore in this case," said Merchant.
Future Group has been caught in a crossfire due to the SIAC ruling. On one hand, it cant go ahead with the RIL deal to and on the other hand if it does not go ahead with the RIL deal a case can be filed against it by RIL for not abiding by the terms of the closure of the deal within the specified time in the RIL-Future agreement.
The RIL-Future deal primarily helps the Future Group to tide over its acute debt crisis and may help its lenders get their dues worth about $2.5 billion owed by the group. Additionally, the deal will help Future Group’s businesses get enough working capital to run its retail and wholesale stores and retain jobs of its 46,000-odd employees.
The SIAC ruling gives Amazon a breather as a Future-Reliance combine may pose serious competition to the online retailer. The US retailer has been trying to build its presence in the offline retail space to complement its strong online presence.
“Future Group will be catering faster to RIL’s JioMart customers and not Amazon’s if the deal happens. This will put Amazon’s business at stake and make Amazon’s holding in Future Coupons redundant," a person familiar with Amazon’s India plans had said.
Amazon has been betting big on India’s retail story, especially in the wake of the country’s thriving e-commerce industry.
Amazon’s chief Jeff Bezos, in January, earmarked a $1 billion investment this year in India’s retail space. The company has already invested $5.5 billion in India.