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Wednesday, August 10, 2022

Explained: SIAC ruling in Future Retail-Reliance Retail deal, and how it gives Amazon a boost

In the legal tussle between Amazon and Future Retail, Amazon has so far had the upper hand when it comes to orders in its favour, be it from the SIAC or the Supreme Court.

Written by Aashish Aryan , Edited by Explained Desk | New Delhi |
Updated: October 24, 2021 8:16:05 am
The tussle between Amazon and Future Retail dates back to 2019.

The Singapore International Arbitration Centre (SIAC) has ruled against lifting the interim stay that an emergency arbitrator had placed on the Future Retail-Reliance Retail deal in October last year. The ruling is a leg up to Amazon’s claims that the deal between Kishore Biyani’s Future Retail and Mukesh Ambani-led Reliance Retail was a violation of its “contractual rights”.

What does the latest ruling by SIAC mean for the Future Retail-Reliance Retail deal?

In the legal tussle between Amazon and Future Retail, Amazon has so far had the upper hand when it comes to orders in its favour, be it from the SIAC or the Supreme Court. In its ruling, the SIAC has held that the emergency arbitrator was right in putting an interim hold on the Future Retail-Reliance Retail deal, and that they have not been “vitiated by any subsequent events or proceedings”.

Experts say the latest ruling will prove to be another stumbling block in the Future Retail-Reliance Retail deal, thereby delaying the possible merger, as the Supreme Court ruling is also in Amazon’s favour. Future Retail will, in all likelihood, wait for the final decision on the issue before going ahead either way with the plan, an expert said.

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Earlier this year, the Supreme Court had upheld the enforcement of an order by the SIAC emergency arbitrator which had put on hold the Future Group’s deal with Reliance Retail, a subsidiary of Reliance Industries Limited. In its judgment, the apex court had held that such as award can be within the Arbitration Act as these orders were an “important step in aid of decongesting the civil courts” and providing quick interim relief to parties in the arbitration.

Why is Amazon opposed to a Future Retail-Reliance Retail deal?

The tussle dates back to 2019 when Amazon had signed a deal with Future Coupons, the parent company of Future Retail. As per the deal, which was then worth Rs 2,000 crore, Amazon had acquired 49 per cent in Future Coupons.

As part of the deal between Amazon and Future Coupons, Future Retail would be able to place its products on Amazon’s online marketplace. According to Amazon, the deal had then also given it a ‘call’ option, which enabled it to exercise the option of acquiring all or part of Future Retail’s shareholding in the firm within 3-10 years of the agreement.

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In August 2020, when Future Retail inked a Rs 24,713 crore deal to sell its retail, wholesale, logistics and warehousing units to Reliance Retail, Amazon claimed the deal violated the “contractual rights” it had with Future Coupons. On its part, the Future Group had said it had not sold any stake in the company, and was merely selling its assets and therefore had not violated any terms of the contract.

Although Indian laws do not recognise the concept of international arbitration and emergency orders issued by such tribunals, the orders are usually “respected” by business houses.

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First published on: 23-10-2021 at 11:25:57 am
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