Amazon drags Reliance-Future Group deal to international arbitration court

Amazon demanded that RIL deal to acquire Future's retail assets should be called off

Amazon in advanced talks to buy 8-10% stake in Future Retail Representative image

Singapore International Arbitration Centre (SIAC) will soon become a battlefield for the world's richest man and Asia's richest individual. US online retailer, which has slapped a legal notice on Future Group against the latter's deal with Reliance, has now approached SIAC, claiming that the Kishore Biyani-led firm breached the contract under which the US online giant took an indirect stake in their retail business. Jeff Bezos-led Amazon demanded that Mukesh Ambani's RIL deal to acquire Future Group's retail assets should be called off, Economic Times reported.

SIAC, a non-profit body is an alternative method of dispute resolution arising from cross-border transactions involving foreign’ companies beyond the traditional forum of court. Amazon alleged that Future Group's Rs 24,713 crore asset sale to Reliance Industries violated an agreement with the e-commerce giant. 

Amazon last year bought a 49 per cent stake in one of Future's unlisted firms, Future Coupons Ltd, with the right to buy into flagship Future Retail after a period between 3 and 10 years. Future Coupons owns a 7.3 per cent stake in Future Retail.

In August this year, Future reached an agreement to sell its retail, wholesale, logistics and warehousing units to Reliance. The deal is awaiting regulatory approvals.

On Wednesday, it was reported that Amazon has sent a legal notice to Future Coupon, the promoter entity where it bought 49 per cent stake, claiming that the contract stipulated that Future cannot sell any shares to Reliance or any other competitor and that Amazon had the right of first refusal.

The Seattle-based retailer has raised objections to Future Coupons not seeking approval from it even when the US company had the first right for any stake sale. The agreement also had a clause restricting them from selling their shares to any third party or competitor without their consent. It also clearly mentioned Reliance.

However, according to various media reports citing sources, the Kishore Biyani-led group intends to settle this matter amicably, either through mediation or arbitration. The source also pointed out that Future Group had made an offer to Amazon, along with other potential buyers, and the deal with RIL was signed only after the e-commerce behemoth declined it.

Moreover, as per Amazon's contract with Future Coupons, the US entity has first right to invest in Future Retail after three years and before ten years.

The deal with Amazon was also conditional based on the government's FDI policy permitting foreign multi-brand retailing firm. Given that there is no policy, they can't invest, the source said adding Amazon is raising this issue almost a month after the announcement of the deal with Reliance.

Future Enterprises will subsequently sell by way of a slump sale the retail and wholesale business that includes key formats such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL, a Future Group statement had said on August 29.

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