U.S giant Amazon’s face-off against India’s Reliance over Future Retail has grabbed attention in India and beyond. Amazon, eager to make a dent in India — one of the world’s fastest-growing retail markets, is now locked in a protracted, complex legal battle of more than a year with Future, stalling its $3.4 billion sale to Reliance, owned by India’s richest man Mukesh Ambani. After colourful courtroom exchanges, in early March both companies agreed to hold discussions to resolve their dispute, but these too appear to have failed. All the while, lawyers are eagerly watching the developments unfold.
AMAZON HAS ACCUSED RELIANCE OF “PLAYING A FRAUD” IN THE DEAL IT ANNOUNCED WITH FUTURE GROUP. WHAT PROMPTED THIS ACCUSATION?
In 2019, Amazon India invested $200 million in Future Coupons — a promoter entity under the Future umbrella. According to Amazon, this arrangement included non-compete clauses that prohibited Future from selling assets to rivals including Reliance, and included a disputes clause that specified arbitration at the Singapore International Arbitration Centre.
The following year, struggling under the COVID-19 pandemic, Future decided to sell assets to Reliance. Amazon stopped the sale, approaching Singapore arbitrators, but that was only the start of the friction. Both parties have waged lawsuits against each other in Indian courts.
More recently, in February this year, Reliance suddenly took control of hundreds of Future stores, citing non-payment of rent it was due. Following that, Amazon took out attack ads in Indian newspapers accusing Reliance of “playing a fraud.”
R. Sudhinder, senior partner at Argus Partners says the retail assets of Future Retail “were allegedly transferred to Reliance contrary to the orders of the tribunal,” sparking Amazon’s accusations.
“It was claimed by Future Retail Limited (FRL) that the owners of its retail stores had terminated the lease arrangements and Reliance, in order to provide continuity of business, took over the lease of the properties. Amazon alleges that this is a dishonest method of transfer of the retail assets,” Sudhinder explains.
WHAT STRATEGIES HAVE LAWYERS OF THE VARIOUS PARTIES USED DURING THE FIGHT?
Top Indian firms and lawyers have supported the different parties throughout the battle. Two lawyers formally occupying the position of Solicitor-General of India have argued for Amazon and Future, according to Reuters.
Sudhinder says that Amazon has consistently claimed that Future Retail “could not have agreed to transfer its business to Reliance contrary to the undertakings in the agreements between Amazon, Future Retail, Future Coupons, and promoters.”
Meanwhile, Reliance and Future Retail have contended that “Amazon cannot stop Future Retail from transferring its business and that the shareholders agreement is between Amazon and Future Coupons. Amazon is trying to control the business/ownership of FRL indirectly,” Sudhinder says.
The latest development, Sudhinder says, is that the country's competition regulator has suspended its approval to the Amazon-Future Coupons combination. He notes that it “has created further impediments for Amazon,” and that will be a “tough road ahead for” the American company.
WHAT COMES NEXT?
The legal battle is far from over — Reuters has reported that Amazon plans to file a criminal case against Future in a New Delhi court as the situation escalates.
Another big question, given the volatile fallout is whether the dispute will set a precedent for legal battles between corporates going forward.
The short answer is “Yes,” Sudhinder says, noting that “corporates will have to be far more diligent before inking any such deal.”
