EMERGENCY ARBITRATION: WHEN DOES IT COME INTO PLAY

Arbitration

Undisputed Legal | Process Service

Because of the novel coronavirus pandemic’s backlogs and budget cutbacks, parties will progressively resort to arbitration as a dispute resolution method of choice. Numerous business issues are settled via commercial arbitration.

Many of the most prestigious arbitral organizations have recently updated their rules to better meet the demands of their clients. The establishment of emergency arbitrator proceedings has been a significant advance, allowing parties to seek immediate relief before the substantive panel is constituted. Parties and arbitrators are paying close attention to these new procedures, and with good cause.

RECENT TRENDS IN ARBITRATION

Recent Trends in arbitration include expedited Arbitration. There has been an increase in the use of expedited arbitration, which has resulted in amendments to institutional rules to incorporate provisions governing expedited proceedings. This includes the recent introduction of the [A.] revised International Centre for Dispute Resolution (ICDR)/American Arbitration Association (AAA) rules wherein the parties initiated seventy-five international expedited cases at the ICDR in 2020; [B.] revised International Chamber of Commerce (ICC) rules and [C.] International Institute for Conflict Prevention and Resolution (CPR) which provided Fast Track Rules for Administered Arbitration. Many courts, tribunals, and organizations are choosing virtual hearings over delaying cases in response to COVID-19 and government health restrictions. The use of digital technologies has also grown in popularity.

Summary Adjudication has also been incorporated in arbitration increasingly. The number of petitions for summary adjudication of claims or defenses that have no basis is rising steadily. Many revised institutional norms provide explicit and implicit provisions for summary adjudication. Arbitral tribunals with the competence of summary decision are recognized by the ICC, the ICDR/AAA, the Singapore International Arbitration Centre (SIAC), and the Stockholm Chamber of Commerce (SCC).

Parties are also increasingly using emergency arbitration proceedings, under which an emergency arbitrator is appointed before the constitution of a tribunal. The ICC has administered close to a hundred and fifty emergency cases since the emergency arbitration provisions came into force in 2012.

Though arbitration has been growing in vitality across the nation, a major reason for strengthened arbitration is Court Intervention. In order to force the provision of information by third parties, parties often turn to US domestic courts. The united states code gives federal district courts the authority to compel discovery in support of an international court or body. Appellate courts in the United States are divided on whether 28 U.S.C. 1782 applies to private arbitral tribunals, and the Supreme Court of the United States has just decided to address this question. In certain cases, US courts step in to aid arbitration procedures.

Before the arbitral panel is appointed, a party may seek injunctive relief from a court to preserve the status quo (for example, to prevent the termination of a contract before the tribunal is constituted). The court looks to see whether the usual conditions for issuing injunctive relief are met. One may even request the appointment of an emergency arbiter to keep things as they are.

Pro-tem or conservatory procedures are provided to parties who cannot wait for the establishment of an Arbitral Tribunal under emergency arbitration. There is a real likelihood that the requesting party will succeed on merits if an Emergency Arbitration is invoked under the considerations of [A.] fumus boni iuris which is a reasonable possibility that the measure is granted immediately, and [B.] periculum in mora wherein the loss would not be compensated by damages if it is not granted immediately.

WHEN AN EMERGENCY ARBITRATION BE GRANTED

Interim measures or conservatory relief may only be granted for a limited time under an Emergency Arbitration. For all intents and purposes, it performs similar, if not identical, duties to an ad hoc tribunal, which is formed for a specific reason and promptly disbanded once that goal is fulfilled or the time period allotted for the resolution of such problems expires. For the most part, national arbitration rules include an ‘opt-out’ policy for emergency situations, which implies that these provisions only don’t apply in full if the parties explicitly agree to omit ‘Emergency Arbitrator Provisions.

The term ‘Emergency Arbitrator’ refers to an arbitrator appointed specifically for emergency arbitration. After the Interim Order is issued, the Emergency Arbitrator is rendered functus officio. Emergency arbitration is a mechanism that ‘allows a disputing party to apply for urgent interim relief before an arbitration tribunal has been formally constituted’.1

If an arbitral tribunal is not yet in existence or if it would take too much time to put one up because of the requirements of an arbitration agreement or institutional regulations, Emergency Arbitration may play a critical role. Many additional flaws in the system make Emergency Arbitration seem like a good idea, including a lack of trust in the national courts to provide immediate relief, leaking of private information, and exorbitant litigation costs. The following are only two of the numerous steps that must be taken as soon as a party chooses to seek the remedy of equitable adjustment:

Documentation proving service of the application on the opposing party is required. In accordance with the agreed-upon fee structure, with the implied assumption that the application of Emergency Arbitration would be restricted to signatories to the Arbitration agreement or their successors, fees will be paid.

APPLICABILITY OF EMERGENCY ARBITRATION

When a dispute occurs, many parties examine whether or not they may seek urgent interim relief in order to maintain the status quo or to prevent the other party from continuing the infringement in issue until the dispute is finally resolved. Interim relief may be obtained in arbitration via a variety of different routes.

Most countries allow courts to provide temporary relief in support of arbitration agreements. If a party must seek interim relief in open court, some of the advantages of arbitration, including confidentiality and efficiency, could be compromised. The arbitral procedure may be preferred by certain parties because of this. As with a court, a tribunal constituted once will have broad authority to provide temporary relief.  If one side is recalcitrant or raises objections to the proposed arbitrators, the selection of the substantive tribunal may take months.

Therefore, several prestigious arbitral institutions have developed processes for appointing an emergency arbitrator in order to bridge this gap by enabling parties to receive immediate arbitral relief before a formal court is constituted in times of crisis. For temporary relief petitions that absolutely can not wait for the establishment of a substantive tribunal, the arbitral institution will appoint an emergency arbitrator at an accelerated pace.

ENFORCEABILITY OF EMERGENCY ARBITRATION

As a general rule, arbitral rules governing emergency arbitrators state that their judgments are temporary in nature, meaning the substantive tribunal may subsequently modify or suspend them. Interim measures may lapse automatically after a specific length of time in certain cases.

A preliminary order, a procedural order, a directive, or an interim or partial award may be issued by an emergency arbitrator (and arbitral tribunal) based on the relevant arbitral rules and legislation. To circumvent the ICC’s ‘scrutiny’ procedure for awards, the ICC mandates that emergency arbitrator judgments take the form of an order. This avoids delaying the issuing of an emergency decision. The SCC and ICDR regulations, on the other hand, allow for a decision to be made in the form of an order or an award.

The enforceability of the temporary remedies has been questioned notwithstanding the desire and apparent need for them. Interim binding relief raises important issues, as does the fact that emergency arbitrator judgments are made by someone other than the substantive tribunal in emergency situations. Another factor to consider is whether or not arbitrator temporary relief is issued in the form of an order rather than a decision.

In spite of the fact that several arbitral institutions have adopted emergency arbitration rules in commercial arbitration, such as the ICC Rules (2017 and 2021), the LCIA Rules (2014 and 2020), and the HKIAC Rules (2018), the spread of such a mechanism to investment arbitration is still a bit of a mystery at this point. An emergency arbitrator is not provided for, for example, by either the ICSID or UNCITRAL Arbitration Rules.

[4.1] APPLICABILITY UNDER DIFFERENT RULES

The SCC Rules (2017), the SIAC Investment Rules (2017), and the CIETAC International Investment Arbitration Rules (2017) all include procedures for the appointment of an emergency arbitrator that are applicable to investment arbitration proceedings, notwithstanding this.

The procedure to be followed under these three sets of rules is broadly similar. The appointment of an emergency arbitrator follows the filing, by the requesting party, of a written request to that end to the arbitral institution. International Chamber of Commerce (ICC) allows for a party to seek the appointment of an emergency arbitrator under Article 29 of the ICC Rules of Arbitration.  Under this article, a party that needs ‘urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal may apply to the ICC Secretariat for the appointment of an emergency arbitrator under the procedures of the rules.

The ICC will terminate the emergency arbitrator procedures if a Request for Arbitration is not submitted within ten days of the emergency arbitrator request, although a party can submit before a Request for Arbitration is filed. It is anticipated that once the emergency arbitrator is chosen, they will then deliver a judgment within days or weeks at the latest. Also, the lex arbitri should be taken into account while determining the authority of an emergency arbitrator.

In assessing whether the emergency relief sought should be granted, emergency arbitrators appointed under the SCC Rules have referred to specific criteria like [A.] the prima facie jurisdiction of the tribunal; [B.] the prima facie case on the merits; [C.]  the risk of irreparable or imminent harm; [D.] urgency; [E.] the proportionality of the measures sought. In fact, some tribunals have also discussed the necessity of the measures sought

The standard for awarding interim relief is raised when the emergency arbitrator is asked to deal with the host State’s actions linked to its sovereign power, such as when taking tax measures. The decision of an emergency decision is binding on the parties. However, this decision can be amended or revoked at the request of a party by the emergency arbitrator itself, or by the arbitral tribunal once appointed.

ARBITRATION RULES THAT HAVE NOT INCORPORATED EMERGENCY ARBITRATION

The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention) and the applicable domestic arbitration laws, many of which are based on the UNCITRAL Model Law on International Commercial Arbitration, are the key enforcement mechanisms in international commercial arbitrations (the Model Law).

The New York Convention is deafeningly quiet on the issue of interim awards and orders issued by arbitrators. It seems that only ‘awards’ are covered by the agreement, excluding arbitration orders of any kind, whether interim or final. Furthermore, there is no definition of ‘award,’ although in many jurisdictions finality is regarded an important feature of an award — not least because the convention stipulates that a party may oppose the execution of an award on the grounds that it is not yet ‘binding.’ In this way, the enforcement of interim-binding orders and awards is called into doubt.

Although the New York Convention does not explicitly address interim remedies, the original Model Law gives tribunals the authority to impose such measures. National courts will have exclusive discretion on whether or not to offer help in enforcing these regulations. To address issues such as arbitrator interim measures, the Model Law has been revised many times since 2006. Tribunals may now give interim remedies in both award and ‘another form,’ with such measures having the same legal force and effect as any other award under the revised Model Law. Aside from that, an order issued as a preliminary order will not be enforced by a court even if it is binding on the parties (and does not constitute an award).

Clarity has been added to the Model Law as a result of the revisions. However, not all problems are completely resolved. Because it fails to define ‘arbitral tribunal,’ it raises the issue of whether an emergency arbitrator is included. It is also essential to note that the 2006 changes were not generally embraced. The enforceability of emergency arbitrator remedy is not explicitly addressed in many domestic arbitration rules, which is unfortunate.

Because of this, domestic courts must decide whether an emergency arbitrator’s judgment, whether it’s in the form of an award or an order, is enforceable unless explicit provisions are made.

HOW COURTS ADDRESS INTERIM ARBITRATION REMEDIES

The way domestic courts have approached this issue varies from jurisdiction to jurisdiction. Some courts have determined that arbitrator interim remedies are enforceable as awards when they ultimately resolve specific problems. It has been ruled that arbitrator interim measures in the United States are enforceable as an award when the judgment that contains them resolves a self-contained problem definitively.

In certain cases, courts may enforce arbitration orders and judgments by looking at the content of the measure rather than its form. Also, whether the emergency arbitrator-granted interim remedy is enforceable in the same way as interim relief issued by the substantive tribunal is a current matter. When it comes to emergency arbitrator judgments and interim measures issued by a substantive arbitral tribunal, US courts have usually taken the equivalent stance. However, this is not the case across the board. Treating interim measures as an award, as the Swiss Federal Tribunal has, is ‘dangerous,’ according to the court.

Of course, not all temporary remedies will ‘eventually’ settle a disagreement. Even in jurisdictions that are known to be pro-enforcement, this uncertainty lingers. Worse, there are just not enough court precedents to accurately anticipate how emergency arbitrator rulings will be handled in many countries.

Due to the present worldwide patchwork approach, arbitral courts’ interim remedies remain unclear and unevenly enforced. Questions about the enforceability of arbitrator interim remedies will continue until additional procedures to enforce emergency arbitrator judgments are brought before courts or until lawmakers decide to deal with the problem in domestic legislation.

Uncertainty about enforcement is a critical factor for customers to think about before turning to an emergency arbitrator or a court for help. Obtaining local legal counsel from the jurisdictions where enforcement will be sought is essential before making a decision.

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Sources

1. These sectors have the most caseloads of any other: building and infrastructure; financial services; healthcare; life sciences; information and communications technology; insurance; aviation/aerospace; media; and real estate.

2. The American Arbitration Association (AAA) is a not-for-profit organization in the field of alternative dispute resolution, providing services to individuals and organizations who wish to resolve conflicts out of court, and one of several arbitration organizations that administers arbitration proceedings. The AAA also administers mediation through www.AAAMediation.org and other forms of alternative dispute resolution. It is headquartered in New York City, with regional offices in Atlanta, Boston, Charlotte, Chicago, Dallas, Denver, Detroit, East Providence, Rhode Island, Fresno, Houston, Los Angeles, Miami, Minneapolis, New York City, Philadelphia, Phoenix, San Antonio, San Diego, San Francisco, Seattle, Somerset, New Jersey and Washington, DC.

The International Centre for Dispute Resolution (ICDR), established in 1996 by the AAA, administers international arbitration proceedings initiated under the institution’s rules. ICDR currently (as of 2018) has offices in New York City, Mexico City, Singapore, and Bahrain.

3. Parties initiated 101 expedited arbitrations at the ICC in 2020, compared to 15 in 2017.

4. ‘Fast Track Administered Arbitration Rules.’ CPR International Institute for Conflict Prevention & Resolution, https://www.cpradr.org/resource-center/rules/arbitration/fast-track-administered-arbitration-rules.

5.  In 2020, parties brought 32 emergency arbitration proceedings at the ICC, and 23 of these proceedings had a US place of arbitration. 13 of these cases were in New York. As of 31 December 2020, parties had brought 119 emergency arbitration proceedings at the ICDR and AAA, including 85 applications under the ICDR International Rules and 32 applications under the AAA Commercial Arbitration Rules

6. 28 U.S. Code § 1782 – Assistance to foreign and international tribunals and to litigants before such tribunals

7. McCreary & Tire & Rubber Co. v. CEAT S.p.A 501 F 2d (3d Cir. 1974)).

8. The ICC, the ICDR, the SIAC, the SCC, and the LCIA are among the arbitral institutions that have implemented emergency arbitrator procedures.

9. ICC adopted its own version – Article 29 and Appendix V (together, the ‘EA Provisions’) – as part of the 2012 revision of the ICC Arbitration Rules.

10. Article 29 applies to any agreement for ICC arbitration concluded on or after January 1, 2012, unless the parties expressly ‘opt-out of Article 29.

11. As enumerated in Appendix V of the Rules, 

12. Island Creek Coal Sales Company v City of Gainesville Florida (1985), 729 F2d 1046, U.S.C.A., 6th Circuit

13. Yahoo! v Microsoft Corporation, 983 F. Supp. 2d 310 (S.D.N.Y. 2013

14. Judgment of April 13, 2010, DFT 136 III 200

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