In this post, PANAGIOTIS CHALKIAS discusses the new trend of institutional rules providing for emergency arbitrator prior to the appointment of the arbitral tribunal.
After the recent amendments to the Rules of Arbitration of the International Chamber of Commerce, it has become clear that a new trend has been established with respect to interim measures requested prior to the constitution of the arbitral tribunal. This trend has already been espoused by a number of arbitral institutions, including AAA (ICDR), CPR, SCC, SIAC, ACICA, and P.R.I.M.E. Finance . The revised version of the Swiss Rules of International Arbitration will also include new provisions on Emergency Relief. These recent developments beg the question of the utility of such mechanism, whether demonstrated in the course or in the end of international arbitration proceedings.
Starting first with the number of emergency arbitrator requests – the arbitral institutions receive only modest numbers of such requests (see reports of SIAC, SCC , and AAA). And when such requests have been made, they have been seldom granted. One possible reason behind this rare use is the overcoming burden of proving not only the urgency of the application (as defined in article 26.2 of the UNCITRAL Arbitration Rules) in the sense of conventional interim measures requests. There needs also to be an “emergency” in the sense that the requested interim measures cannot await until the constitution of the arbitral tribunal. Thus, the period has been shortened from the time needed to deliver a final award to the time it takes to empanel the arbitrator(s). The users of this mechanism should then take into consideration this parameter before applying for emergency relief. Another consideration is also the automatic termination of the emergency arbitrator proceedings in case where a Request for Arbitration has not been filed within the designated period of time. Parties should then first substantiate their claims during the preparation of a Request for Arbitration before they file emergency relief requests.
The most delicate question to answer when interim measures are ordered by arbitrators is related to their legal effects. Especially the question of enforceability becomes thorny if we take into account the lack of coercive powers, referred to as ‘lack of imperium‘, of arbitrators to enforce their orders. Despite this inability, we should not underestimate the frequency of parties’ voluntary compliance. We should also remember that when there is no compliance, arbitrators have the power to draw adverse inferences against the recalcitrant party, when evaluating the evidence produced during the arbitral proceedings. The national courts’ judgments on the enforceability of arbitral interim measures have always dealt with the following question: How final is provisional? Regarding emergency relief orders or “awards”, the question should now be: How final is truly urgent?
To my knowledge, the only judgment that discussed the question of enforceability of an emergency arbitrator’s order is the one issued by the district judge of the Southern District Court of California. More specifically, the judge was seized with a motion to vacate what an AAA (ICDR) arbitrator denominated as an “Order re [Plaintiff’s] Request for Emergency Interim Award Pending Arbitration.” An eventual recognition that this order constitutes an award susceptible of being set aside would signify the opening of the enforcement route under the New York Convention’s umbrella. The district judge confirmed what was already established with respect to the enforceability of arbitral interim measures. First, the judge stated that “historically, for an arbitration award to be subject to judicial review, it must be final (emphasis added) and binding as to all of the issues presented to the arbitrator”. The judge then clarified that “[c]ourts go beyond a document’s heading and delve into its substance (emphasis added) and impact to determine whether the decision is final”. Based on these guiding principles, the judge went on to examine the substance of the emergency arbitrator’s order. The fact that the “order was issued in order to facilitate any consideration by the full panel of conservancy ….” and that it would “remain in effect pending review of the full arbitration tribunal”, as also foreseen by article 37.6 of the AAA (ICDR) Rules was decisive in reaching the following conclusion: “The Court concludes that the evidence does not present an “extreme” case permitting judicial review of a non-final (emphasis added) order because the interim order is expressly subject to reconsideration, modification, or vacatur by the full (arbitral) tribunal.”
One should then ask why parties should opt for a request for emergency relief. Parties should first assess the above-mentioned chronological factor. Only truly urgent situations, like for instance the depletion of stock in a distribution agreement, should be the object of such requests. Another reason appears when parties wish to preserve the confidentiality and neutrality of the proceedings. Additionally, parties should bear in mind that the scope of interim measures ordered by national courts is more restricted than the one ordered by arbitral tribunals. Where arbitrators can apply both civil and common law tools in arbitration proceedings, national courts can issue the interim measures prescribed exclusively by their national legislation. We should also not forget that a [un]successful request for interim or emergency relief can induce party settlement. A petition to apply to the national courts of the Claimant’s country is often seen as an aggressive tactic, which endangers equally the neutrality of arbitration proceedings.
It is evident that these advantages stem from the same reasons why parties prefer arbitration over court litigation. Thus, the possibility of addressing requests to emergency arbitrators creates a more autonomous arbitral process, notably in an area where the concurrent jurisdiction of national courts can still play a positive (assistance) or negative (interference) role. However, we should note that the emergency arbitrator proceedings were not introduced to antagonize court proceedings dealing with requests for interim measures. With the enforceability problem still unsolved, emergency arbitrator procedures do not constitute a panacea but offer an alternative to arbitration users who wish to restrict any judicial interference from municipal courts.
As a final note, the current trend of introducing emergency relief mechanisms shows that the arbitral institutions are ready and willing to offer viable solutions to satisfy the need for a speedy disposition of interim measures requests. This is also noticeable by the way the arbitral institutions handled within very short timeframes such kind of requests. While the future of this trend is unpredictable, the reaction of national arbitration statutes and of international non-binding instruments, such as the UNCITRAL Model law, is highly awaited. Since the amendments of 2006, the UNICTRAL Model law contains a whole chapter (IV) on interim measures, preliminary orders and their enforceability. It is unfortunate that during the drafting sessions of these amendments the question of the emergency arbitrator procedure was not discussed. Without the approval of these instruments, this speedy tool for emergency relief is bound to lapse. Readers’ comments with respect to the way this procedure has been applied are welcome.