In a win for Amazon, an arbitration court in Singapore on October 20 rejected Future Retail’s plea to be excluded from the ongoing dispute with Amazon. The court said that Future Retail is a party to the agreements signed between Amazon and Future Coupons and must participate in the arbitration process. As a result of this ruling, Reliance’s acquisition of Future Retail continues to be on hold.
Recap: In August 2020, Reliance announced it will buy most of Future Group’s retail, wholesale, and logistics business in a deal worth Rs 24,713 crore, but Amazon, which held a 49 percent equity in Future Coupons, the promoter entity of Future Retail, accused Future Retail of breach of contract and slapped it with a legal notice. Amazon said that it had a non-compete-like pact and right of first refusal against deals with competitors like Reliance. On October 25, Amazon obtained a stay order on the Future–Reliance deal from an emergency arbitrator appointed by the Singapore International Arbitration Center (SIAC). Future Retail filed an appeal with SIAC arguing that Amazon’s agreements were with the various promoters of Future Retail and not Future Retail itself and it also filed a petition with the Delhi High Court arguing the emergency arbitrator’s order does not have jurisdiction in India. Eventually, the Delhi High Court and then the Supreme Court ruled that the emergency arbitrator’s award obtained by Amazon in Singapore can be legally enforced in India. Future Group filed a fresh challenge in Supreme Court against Amazon, and the court stayed all proceedings regarding the Future–Reliance deal for four weeks.
What did the Singapore arbitration center say?
In its order dated October 20, SIAC made “two final and conclusive findings with regard to the three Agreements” signed between Amazon and Future in 2019:
- Each of the parties is bound by the Future Coupons shareholders’ arbitration agreement (SHA) including Future Retail, notwithstanding its non-signatory status
- The Future Coupons SHA arbitration agreement extends to disputes under the Future Retail SHA and share-subscription agreement.
According to Reuters, SIAC found that the three agreements must be read together, and not separately. “The three agreements were of “composite nature”, “wide and comprehensive enough” and the tribunal “has jurisdiction over FRL (Future Retail) in this Arbitration,” Reuters reported citing the order.
Apart from challenging on jurisdictional grounds, Future Retail had also asked for a vacation of the order given by the emergency arbitrator in October 2020, but SIAC ruled that the order was “correctly granted” and that Future has “not demonstrated that circumstances have materially changed to justify any change to the EA Award.”
In a regulatory filing, Future Retail said: “While the Tribunal has made no final and binding finding on the effectiveness of the substantive provisions contained in the three Agreements, the Company would be deciding on its future course of action based on the legal advise and available remedies in law.”
What’s next for Future and Amazon?
This SIAC ruling is only the beginning of a long road ahead. Now that the tribunal has ruled that Future Retail is a party to the agreements, it will start hearing arguments on the main case: whether Amazon can refuse the Reliance deal from going ahead. This hearing is expected to begin in the first week of November.
According to sources cited by the Economic Times, Future Group and Amazon are likely to start negotiating an out-of-the-court settlement because waiting for a final verdict from the arbitrator could take years.
The SIAC ruling also gives Amazon more grounds to seek favorable rulings from India’s Supreme Court. Amazon has already approached the court seeking an order to stop Future Group companies from convening meetings with their shareholders to seek approval for the Reliance deal. The National Company Law Tribunal on September 28 allowed Future Group to convene these meetings, but Amazon is now asking the Supreme Court to set aside NCLT’s decision.
A complete timeline of events
November 2019: Amazon received approval from the Competition Commission of India (CCI) to acquire a 49 percent equity in Future Coupons, the promoter entity of Future Retail, which operates 900 stores in India, including 293 Big Bazaar stores. Since Future Coupons owned a 7.3 percent stake in Future Retail, the deal gave Amazon a 3.58 percent stake in Future Retail.
August 2020 – Reliance Industries announced it will buy most of Future Group’s retail, wholesale, and logistics business in a deal worth Rs 24,713 crore.
October 7, 2020 – Amazon accused Future Group of breach of contract and slapped it with a legal notice over the Future-Reliance deal. Amazon reportedly had a non-compete-like pact and right of first refusal against deals with competitors like Reliance Retail.
October 25, 2020 – Amazon obtained an injunction order against the Future-Reliance deal from an emergency arbitrator appointed by the Singapore International Arbitration Center (SIAC).
November 2, 2020 – Future Group urged stock exchanges to ignore Amazon’s objections to the Reliance deal saying that the emergency stay on the transaction obtained by Amazon from the Singapore arbitration court had no legal force in India. Amazon later accused Future Group of misleading shareholders and insider trading.
November 7, 2020 – Future Group moves Delhi High Court against Amazon interfering in the acquisition by Reliance arguing that Amazon’s agreements were with the various promoters of Future Retail and not Future Retail itself.
November 20, 2020 – Despite Amazon’s protest, the Competition Commission of India approved Reliance Retail’s ₹24,713 crore acquisition of Future Group’s retail, wholesale, logistics, and warehousing businesses.
December 21, 2020 – The Delhi High Court said that while it wouldn’t stop the Future-Reliance deal from happening, the court wouldn’t interfere with regulators making their own assessment of the legality of the deal.
January 20, 2021 – The Securities and Exchange Board of India (SEBI) gave its conditional approval for the Future-Reliance deal.
March 18, 2021 – A single judge from Delhi High Court upheld the emergency arbitration order obtained in Singapore against Future Group, putting on hold the Future-Reliance deal. The judge upheld that the purchase violated an agreement that was signed between Amazon and Future Coupons, an investor company in Future Retail Limited. The court observed that the Future Group had agreed to give Amazon a veto on transactions like the Reliance Retail acquisition, but failed to hold good to that commitment. The high court also attached the properties of Future Group and its promoters Kishore and Rakesh Biyani and ruled that the company must deposit Rs 20 lakh into the PM-CARES fund, and that company executives must respond on why they shouldn’t be jailed.
March 22, 2021 – A division bench of the Delhi High Court stayed the March 18 order. Amazon appeals to the Supreme Court against this stay order.
July 12 – 17, 2021 – The Singapore International Arbitration Centre (SIAC) helda week-long hearing on Future Retails’ appeal to the validity of the emergency arbitrator’s order.
July 21, 2021 – The Supreme Court began hearing arguments from Future Retail and Amazon.
July 23, 2021 – CCI in a letter dated June 4 accused Amazon of concealing facts and making false submissions in 2019 when it sought approval for an investment in Future Coupons.
August 6, 2021 – The Supreme Court ruled in favor of Amazon by accepting its appeal against the Delhi HC order dated March 22, which let the deal between Reliance and Future Retail proceed. The court held that the emergency arbitrator’s award obtained by Amazon in Singapore can be legally enforced in India.
August 12, 2021 – Future Group filed a Special Leave Petition in the Supreme Court against the March 18 order of Delhi HC, which is yet to come up for hearing. An SLP can be filed against orders which are otherwise non-appealable.
August 17, 2021 – Amazon wrote to the Securities and Exchange Board of India (SEBI) asking the market regulator to withdraw the conditional approval it has given to the Future – Reliance deal.
August 18, 2021 – The Delhi High Court told Future Group that, unless it gets a stay order from the Supreme Court by September 17, the court will implement its single-judge order issued on March 18 restraining the sale of Future Retail to Reliance and attaching its properties
August 28, 2021 – Future Group files a fresh legal challenge in Supreme Court against Amazon.
September 9, 2021 – The Supreme Court stayed all Delhi HC orders in the Amazon vs Future case and asked SEBI, CCI, and NCLT to not pass any final orders regarding the Reliance–Future deal for four weeks.
September 28, 2021 – The National Company Law Tribunal allowed Future Group to convene meetings of its shareholders and creditors for approval of its deal with Reliance. The tribunal refused Amazon’s application opposing this.
October 1, 2021 – Reliance extends the deadline to complete the acquisition of Future to March 21, 2022.
October 11, 2021 – Future group firms have convened shareholder and creditor meetings on November 10 and 11 to seek approval to merge the 19 different firms that Reliance is buying into a single entity, Future Enterprises, the Economic Times reported. The firms that have convened meetings include Future Retail, Future Consumer, Future Lifestyle Fashions, Future Markets Networks, and Future Supply Chain Solutions.
October 20, 2021 – SIAC rules Future Retail is party to the agreements signed between Amazon and Future Coupons and must participate in the arbitration process. Separately, Amazon approaches the Supreme Court seeking an order to stop Future Group companies from convening meetings with their shareholders to seek approval for the Reliance deal.
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