The Retail Saga: Future-RIL vs Amazon battle explained

On October 25, Amazon won an interim award against its partner Future Group selling retail business to Mukesh Ambani's Reliance Industries Ltd for Rs 24,713 crore after Singapore International Arbitration Centre (SIAC) — a single-judge arbitration panel — put the deal on hold.

The deal, Amazon alleges, breaches a 2019 deal it had with a Future unit. However, Future Group claims that it had complied with all agreements and "cannot be held back" by the arbitration proceedings.

What is the Amazon-Future Group deal?

Amazon, last year, had bought a 49 per cent stake in one of Future's unlisted firms worth nearly $200 million, Future Coupons Ltd, with the right to buy into flagship Future Retail after a period between three and 10 years. Future Coupons owns a 7.3 per cent stake in Future Retail.

Why is Amazon alleging a 'breach'?

Amazon argues that the deal it had with Future had clauses saying the Indian retailer couldn't sell its retail assets to anyone on a "restricted persons" list including any firms from Reliance chief Mukesh Ambani's group. However, on August 29, 2020, the Future group had announced the sale of its retail, wholesale and logistic units to Reliance Retail Ventures Limited, the retail arm of the Reliance Industries, following which Amazon is locked in a bitter legal dispute with the Future Group.

Why is the arbitration taking place in Singapore?

The Amazon-Future Group deal specified any disputes would be arbitrated under SIAC. On October 16, the hearing was concluded by the arbitration panel. The 130-page order by the arbitrator reveals how Jeff Bezos-led Amazon argued that Future breached agreements which barred it from selling retail assets to entities including Reliance, whose boss Ambani is Asia's richest man.

How the interim award works and how will it be enforced on the parties?

Passing an interim award in favour of Amazon, V K Rajah of the SIAC had asked the Future group to put the deal on hold and reportedly said that the deal cannot go through until it finally decides the matter. Both Amazon and Reliance Industries reacted to the arbitrator's decision by saying they want to complete the deal "without any delay", setting the stage for a showdown between Reliance and Amazon -- each led by one of the world's richest men.

According to a report by The Indian Express, Amazon can move the High Court in India under Section 9 of the Arbitration & Conciliation Act, 1996, to get similar reliefs as granted by the Emergency Arbitrator. Head of International Dispute Resolution & Investigations Practice for Nishith Desai Associates in Singapore, Ashish Kabra, told the publication that under Indian law, there is no express mechanism for enforcement of the orders of the Emergency Arbitrator.

Also read: Amazon tells Sebi its partner Future Retail is 'misleading public'

Some Indian lawyers have also argued the Singapore arbitrator's order in favour of Amazon is not automatically enforceable and would need ratification by an Indian court. But Amazon believes the order is binding, it told Sebi in a letter and asked the regulator to "suspend review" of the deal.

What happens if the Reliance-Future Group deal doesn't come through?

The Reliance-Future Group deal has the potential to help Reliance almost double its footprint as India's largest retailer. India's Future Retail Ltd (FRL) will go into liquidation if its deal to sell assets to Reliance Industries fails, the group told the Singapore arbitrator while arguing against Amazon.com Inc's bid to scupper the deal, Reuters reported earlier.

"If the disputed transaction falls through, FRL will go into liquidation. That will mean that the livelihoods of more than 29,000 employees of FRL will be lost," the Indian group's representatives told the arbitrator V K Rajah, a former attorney general of Singapore.

Also read: In fight with Amazon, India's Future Retail sees liquidation if Reliance deal fails

The Covid-19 pandemic has hit many Indian businesses, especially in the retail sector, and the FRL-Reliance deal was aimed at protecting the interests of all stakeholders through a large infusion of funds and the acquisition of liabilities, Future argued at the tribunal.

Can Future Group challenge the interim award of the emergency arbitrator in India?

Kabra told the publication that if Future Group files a petition before the High Court in India under Section 9 of the Arbitration & Conciliation Act, 1996, then the Future Group could put forth its objections on why the reliefs granted to Amazon should not be granted. "It may either apply before the Emergency Arbitrator itself showing cause why the order should be vacated or modified, or await the constitution of the arbitral tribunal and then apply before the main tribunal," he was quoted as saying.

(With agency inputs)