Future Group case: Singapore arbitration body rules in Amazon's favor
What's the story
The Singapore International Arbitration Centre (SIAC) has ruled in favor of Amazon in its ongoing legal dispute with Kishore Biyani-led Future Group. The SIAC found that Future Group breached its contractual obligations to Amazon by entering into a deal with Reliance, thus violating the terms of their pre-existing agreement. However, despite seeking ₹1,436 crore in damages for its investment in Future Coupons Private Limited (FCPL), Amazon was awarded only ₹23.7 crore by the tribunal.
Tribunal ruling
Details of the tribunal's ruling
The three-member SIAC tribunal comprised Professor Albert Jan van den Berg, Professor Jan Paulsson, and Senior Counsel Michael Hwang as presiding arbitrator. They ruled that the resolution passed by Future Retail Limited (FRL)'s Board of Directors approving the transaction with Reliance was a breach of its agreement with Amazon. The tribunal has awarded only 60% of the legal costs incurred during arbitration proceedings while denying any costs related to initiation or defense in allied proceedings.
Investment details
Background of the case
The Amazon-Future Group dispute dates back to 2019 when Amazon invested ₹1,431 crore for a 49% stake in FCPL, a Future Group subsidiary. The deal was meant to offer Amazon indirect access to FRL, India's second-largest retail chain with Big Bazaar stores. However, the shareholder agreements had restrictive covenants preventing Future Group from selling assets to a list of 30 "restricted persons," including Reliance Industries.
Deal announcement
Future's deal with Reliance
In August 2020, Future Group announced a ₹24,713 crore agreement to sell its retail, wholesale, logistics and warehousing businesses to Reliance Industries. The announcement came as the group struggled with COVID-19 lockdowns and debts of ₹22,000 crore. Amazon quickly objected to the deal claiming it violated their 2019 agreements. The dispute led to arbitration proceedings at SIAC in October 2020 which resulted in an emergency arbitration award halting the Reliance-Future deal.
Award details
Tribunal's view on damages, breach of contract
In its final award, the SIAC tribunal announced the 2020 board resolution by FRL approving the sale of its assets to Reliance, was in breach of contractual obligations between Amazon and FCPL. The tribunal held that Amazon was entitled to damages due to the promoters' repudiatory breaches but rejected the quantum claimed by the company. It found that even if all contractual agreements had been performed, Amazon would not have recovered its entire investment due to FRL's declining financial condition.