Amazon Vs Future Retail: Arbitration Battle At Singapore To Start From July 12

Arbitration proceedings in Singapore will resume next week. Back home, the battle has moved to the Supreme Court before a three-judge bench of Justices RF Nariman, KM Joseph and BR Gavai.

Amazon.com NV Investment Holdings LLC has alleged that the Rs 27,513-crore deal between Mukesh Ambani’s Reliance Retail Ltd. and Future Group violates its contractual rights.

In 2019, Amazon had invested in Future Group by acquiring a 49% stake in Future Coupons Ltd. — a promoter entity of Future Retail. Future Coupons holds 9.82% in Future Retail. At the time, Future Coupons and Future Retail had also entered into a shareholders’ agreement.

As per the SHA, Amazon has stated, Future Retail requires prior approval from Future Coupons on certain matters namely transfer or licence of all or substantially all of its assets or material assets; transfer of assets above a certain threshold to a related party; amendment of articles of association in conflict with the terms of the shareholders’ agreement, etc.

Broadly, Amazon has argued that its approval is required for the deal between Future Retail and Reliance Retail Ventures Ltd.

Action At SIAC

The arbitral tribunal at Singapore International Arbitration Centre is set to hear and rule between July 12 and July 16 on the pre-arbitration challenges raised by Future Group companies.

In October last year, the emergency arbitrator had granted an interim award in favour of Amazon. It had directed Future Group to put on hold its transaction with Reliance Retail.

On Jan. 5, a three-member arbitration tribunal was constituted comprising Michael Hwang, Professor Jan Paulsson and Professor Albert Jan Van Den Berg.

Future Retail will argue two key issues next week before them:

Jurisdictional challenge to the arbitral tribunal

Future Retail's plea is that it not a signatory to the contract between Amazon and Future Coupon. And so, it cannot be made party to the proceedings arising out of the shareholders agreement between them.

On this aspect, before the Delhi High Court, Future Retail had argued that it's fate cannot be decided by an arbitrator since it’s not party to agreements with Amazon. And that non-signatories to an arbitration agreement cannot be made party to the proceedings.

Vacation of interim award

After the arbitral tribunal was constituted in January, Future Group has made a plea that the emergency arbitrator's interim order should be vacated immediately.

Future Group has relied on the SIAC Rules which say that the emergency arbitrator has no power to act after the arbitral tribunal is constituted. And that the tribunal so constituted may reconsider, modify or vacate any interim order or award issued by the Emergency Arbitrator, including a ruling on his own jurisdiction.

The jurisdictional challenge will be heard on July 12 and 13, as per the schedule drawn up by SIAC. The remaining days will be devoted to the plea of vacation of emergency interim award. The order on these is likely to come by August.

The main hearing on whether there's been a contractual breach by Future Group, as alleged by Amazon, is likely to commence in November this year.

What's Happening At the Supreme Court?

In February, the apex court had agreed to hear the matter after the division bench of the Delhi High Court lifted the status quo on Future-Reliance deal.

The matter came up before the top court this week but Future Retail requested that it be postponed for 4 weeks. The Biyani group company made this request saying the arbitral tribunal will decide on its jurisdictional challenge by July 16.

"The issues regarding jurisdiction of the tribunal over FRL which is a non-signatory to the arbitration agreement and conflation of agreements sought to be done by Amazon.com to invoke arbitration against FRL; are issues which arise ... before the arbitral tribunal," Future Retail told the apex court

The matter before the Supreme Court has now been listed for July 20, post conclusion of the pre-arbitration hearings.

Reliance-Future Deal: Not Much Headway At NCLT

Meanwhile, the Future Group-Reliance Retail deal has made very little progress before the National Company Law Tribunal.

After receiving approval from the Competition Commission of India, stock exchanges and an NOC from SEBI, on Jan. 26, the Future Group entities had approached NCLT Mumbai seeking its approval on the scheme of arrangement.

The scheme involves consolidation of 19 Future Group entities, including five listed ones, into Future Enterprises Ltd. Post that, FEL will by way of a slump sale transfer the retail and wholesale business to Reliance Retail and Fashion Lifestyle Ltd., a wholly owned subsidiary of Reliance Retail Ventures.

On Feb. 12, the NCLT had reserved its order on Future Group’s plea to hold a shareholders' meeting seeking approval on the consolidation.

Reliance Retail has also filed a separate application with the NCLT, seeking approval to proceed with its merger with the Future Group entities.

In its Feb. 22 order, the apex court had allowed the tribunal to continue its proceedings on the scheme of arrangement but not to pass any final orders.

Reliance Retail's application is listed before the Mumbai bench of NCLT on July 9.