Emergency Arbitration: Complicating problem or easing solution?


Emergency arbitration is one of the newest features of international arbitration which has its source in the institutional rules of the major international arbitral institutions. Emergency arbitration is an urgent interim measure requested before the constitution of the full tribunal. The test to satisfy for a successful application is to prove urgency of the measure requested “that cannot await the constitution of an arbitral tribunal”.[1] Therefore, urgency remains at the core of emergency arbitration. Emergency arbitrator must determine whether the application is admissible, whether he/she has jurisdiction, the urgency of the measure and costs consequences, if any.[2]Emergency arbitrator should be an experienced arbitrator having subject-specific expertise and the capability to dispose of the application quickly and efficiently while also affording the parties opportunity of being heard. Due process must be followed which would have to be balanced against the speedy nature of the measure. In practice, nationality of the parties, law of the seat and the applicable law play a vital role in the appointment of the emergency arbitrator by the concerned institution. This article will try to explore some practical features of emergency arbitration that the parties can consider before deciding whether or not to go for applying for emergency relief.


It is to be noted that very few applications for emergency relief have been successful in practice. The main reason behind this is the failure of the applicant to prove to the satisfaction of the emergency arbitrator as to why an emergency arbitrator, rather than a full tribunal, would have to deal with the issue raised. In practice, the applicant would have to be really specific as to the relief sought, and it is best advised to keep the emergency application as simple as possible. This is advisable primarily for three reasons. Firstly, as the emergency arbitration procedure usually takes just 5-15 days before an order is rendered,[3] it is thus an extremely fast process. It would be unwise to make the emergency arbitrator to go through huge bundles of documents and complicated submissions who would have to render a decision that quick. Secondly, if the relief sought is complex and vague, it is highly likely that the application would be refused. Finally, as the documents submitted and submissions made during the hearing shall form part of the arbitration record as a whole, positions taken during the emergency arbitration will become unalterable before the full tribunal. Hence, if a party decides to make an application for emergency relief, that party should try to make the application, submissions and relief sought as simple as possible to increase the likelihood of the measure sought being granted.


Where the institutional rules provide provision for expedited formation of tribunal, the party should also consider why it should apply for an emergency arbitrator, rather than applying for expediting the formation of the full tribunal. In the case of exceptional urgency, any party may apply for the expedited formation of the arbitral tribunal.[4] In such circumstances, it might serve more useful purpose to apply for interim measure before the full tribunal with the benefit of full records after its expedited formation.


Another important consideration is whether to go for courts or emergency arbitration in really urgent situation. Emergency arbitration provisions are not intended to prevent any party from seeking urgent interim measure from a competent judicial authority.[5]However, the English Court in a recent judgment has held that emergency arbitration is an exclusive remedy and a court can only retain jurisdiction where equivalent relief could not be obtained from an emergency arbitrator or an expedited tribunal.[6] Therefore, when the law of the seat is England and the applicable institutional rules contain emergency arbitration provision, a party might lose its right to invoke the jurisdiction of the state court, unless that party expressly opts out of the emergency arbitration provision. In the given context, law of the seat along with the drafting of the arbitration clause (with or without the “opting out” provision) are, thus, substantially important bearing in mind that the emergency arbitration provisions apply automatically if the applicable arbitration rules contain the same, unless the parties expressly decide to opt out.


Parties might prefer emergency arbitration over national courts because of confidentiality, subject-matter expertise, lack of faith in the independence of the national court. However, it should be borne in mind that if a party requires an ex parte interim order, or an interim order against the third party to the arbitration agreement, national court will be the only option.[7]Therefore, it is clear that the question as to whether emergency arbitration is preferable over domestic court has no straightforward answer. It obviously depends upon the facts and circumstances of particular cases and the requirements of the parties seeking emergency relief. However, while choosing between emergency arbitrator and national court, the applicant should bear in mind that court orders can be easily enforced, whereas enforceability of the order of the emergency arbitrator can be very problematic and is jurisdiction specific.


At many times, if not all, going for emergency arbitration procedure is a strategy adopted by the applicant to understand the balance of merits of its case against that of the opposite party at a very early stage. Statistics of many arbitral institutions have shown that this very often lead to early settlement between the parties whereby the parties are being able to save huge costs of expensive arbitration process. Even if the parties decide not to settle, still the stances taken by both the parties during the emergency arbitration procedure help both of them to work on their strategy when the matter goes before the full tribunal. Parties often find this earlier glimpse of the other side’s arguments in emergency arbitration to be very useful for doing homework for the actual arbitration.


The main consideration for the parties should be the problematic feature of enforcement of the emergency arbitrator’s decision. Clearly, the emergency arbitrator’s decision is not an award in the light of the New York Convention 1958 and, as such, the decision is not final.[8]Therefore, enforcement of such decisions becomes problematic depending upon the national court’s views on emergency arbitration. Having realized such problems, pro-arbitration jurisdictions like that of the Singapore and Hong Kong have already given the status of arbitrator to the emergency arbitrator making their decisions enforceable by way of express domestic statute. However, this is not the case for all the jurisdictions. This is why the law of the seat and the law of the enforcement state play a significant role in deciding whether to go for emergency arbitration procedure or not. The solution is obviously to follow the jurisdictions of Singapore and Hong Kong by way of enacting laws giving express recognition to emergency arbitration which will obviously solve the present problem regarding the issue of enforcement.


Having said so, it is also equally important to consider why emergency arbitration procedure is so effective in practice despite the obvious issue in relation to its enforcement. For me, the answer lies with party autonomy. The parties undertake to comply with any order made by the emergency arbitrator.[9]In most cases, therefore, the decisions of the emergency arbitrators are voluntarily complied with by the parties. What if a party chooses not to comply with the same and take shelter behind the problematic feature of its enforcement? In practice, the answer is quite simple. In case of non-compliance, the full tribunal, once constituted, may draw adverse inferences against the non-complaint party. Such a start of arbitration proceedings is undoubtedly not something that a party would want in any given context. Voluntary compliance, therefore, signifies one of the most important features of emergency arbitration making the procedure practically effective and attractive in dealing with truly urgent situation before the constitution of the full tribunal. This is one of the significant reasons as to why the most major arbitral institutions have introduced this procedure in their arbitration rules as well.

[1] ICC Arbitration Rules 2021, Art 29(1) [2] ICC Arbitration Rules 2021, Appendix V, Arts 6, 7 [3] Time range varies from institution to institution [4] LCIA Arbitration Rules 2020, Art 9.1 [5] ICC Arbitration Rules 2021, Art 29(7) [6]Gerald Metals SA v Timis&Ors [2016] EWHC 2327 (Ch) [7] Swiss Rules is the only major arbitral institutional rules providing provision for ex parte interim order by the emergency arbitrator [8] The emergency arbitrator’s order shall not bind the arbitral tribunal and the same may be modified, terminated or annulled by the tribunal: ICC Arbitration Rules 2021, Art 29(3) [9] ICC Arbitration Rules 2021, Art 29(2)

 

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