Future, RIL to fight arbitration verdict
Mukesh Ambani is exploring a countersuit against Jeff Bezos’ Amazon.com Inc. in India after the US e-commerce giant blocked Reliance Industries Ltd’s (RIL) bid to buy Future group’s assets in a Singapore court, as Asia’s richest man squares off against the wealthiest in the world for supremacy in India’s retail market, two people directly aware of the development said, on condition of anonymity.
Both RIL and Future group are likely to approach a court challenging the clause invoked by Amazon before the Singapore arbitration court to stall the acquisition of the Future group’s assets by Reliance Retail Ventures Ltd (RRVL), the people said on condition of anonymity.
The assets of the debt-laden Future group, which include the popular Big Bazaar supermarket chain, are the bone of contention between the two billionaires.
Industry watchers say the assets could give RIL an unassailable advantage in its battle with Amazon for supremacy in India’s retail market that is expected to grow at an annual average pace of 11% to $1.3 trillion by 2025.
Amazon, on Sunday, won interim relief from the Singapore International Arbitration Centre (SIAC). The order stalled partner Future group’s plan to sell its retail and wholesale assets to Reliance Retail Ventures Ltd for ₹24,713 crore.
At the heart of the dispute is an August 2019 investment pact between Amazon and Future in which the US retail giant acquired a 49% stake in Future Coupons Pvt. Ltd (FCPL) for ₹1,430 crore.
The investment gave Amazon a 5% indirect stake in Future Retail Ltd. The non-compete clause in the agreement restricted FCPL and its promoters from forging any alliance with RIL, among 30 other entities.
“Prima facie, RIL’s contention is that Amazon is acting in an arbitrary and unfair manner when it insisted that RIL be included as a restricted entity when it agreed to invest in Future Coupons in 2019,” said one of the three people cited above.
“Amazon is well aware that Future group’s cash position was not good, but despite that, it effectively blocked Future from raising money from names which Amazon was not comfortable with”. This is malicious in nature which both RIL and Future would challenge in Indian court(s)” the first person cited above added.
RIL, Amazon India and Future group did not respond to emails seeking comment.
A person close to Amazon said the company will discuss with Future if the two groups could continue the case at SIAC and go by the final judgement of the tribunal. “The second option could be approaching an Indian court if Future is unwilling to continue at SIAC or reopen discussions with Amazon for bringing in a new partner or investor while calling off the deal with RIL,” the person said.
In a late Sunday night statement after the interim order, RIL said it plans to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay.
Taking a similar stance, Future said on Monday the SIAC order will have to be “tested under the provisions of Indian Arbitration Act in an appropriate forum,” adding “in any enforcement proceedings, Future Retail Ltd would take appropriate steps to ensure the proposed transaction will proceed unhindered without delay”.
The arbitration ruling gives Amazon a breather as a Future-RIL combine is likely to pose a threat to the online retailer.
“With SIAC’s relief, Amazon will get adequate time to plan its next step with regards to expansion or a tie-up with another Indian player to make itself strong enough to compete with RIL, even if Future group ultimately goes ahead with the RIL deal,” said the second person, a senior lawyer.
Amazon will have to also approach an Indian court for enforcement of the Singapore tribunal’s award.
“Arbitral awards are typically not self-enforceable. Hence, the award recipient (Amazon) would consider approaching a competent court in India,” said Neerav Merchant, partner, Majmudar and Partners.