Court brightens future of arbitration

The Supreme Court’s order in the Amazon-Future Retail dispute does not settle whether Reliance Retail can buy Future Group assets as planned. But what it does settle is that the Emergency Arbitration Award that had restrained Future from proceeding with the sale of assets to Reliance is valid. It upholds confidence in arbitration as a legitimate means of dispute resolution, and prevents future situations in which an aggrieved party to a dispute it had agreed to resolve through arbitration feels it can ignore the arbitration award as a nullity, on some ground or the other. This would set a sound precedent for arbitration.

Future Coupons Private Ltd (FCPL) owns 9.82% of Future Retail Ltd (FRL). In return for an investment of Rs 1,432 crore in FCPL, which was supposed to filter through to FRL, the Biyanis, who are major stakeholders in FCPL and FRL, entered into two shareholders agreements that together preclude the sale of FRL without FCPL’s and Amazon’s consent, and specifically barred sale to an enumerated list of entities that included competitors. This agreement in force, the Biyanis negotiated a sale of FRL to Reliance, against which Amazon initiated arbitration and got an Emergency Arbitrator to restrain such sale. As the Delhi High Court single judge who upheld the arbitration award said, it is for statutory authorities to see if Amazon can hope to acquire FRL along with Indian investors.

Now, it is up to the regulators and the government to decide how things should proceed. It is time the government cleaned up the messy FDI restrictions in retail and allowed competition that would benefit consumers and small producers who sell through organised retail, whether online or offline. Competition, not protection, makes for a healthy market.