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EMERGENCY ARBITRATOR: A MERE ‘À LA MODE’ FEATURE OF MODERN ARBITRATION RULES?

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.

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5 responses »

  1. Posted in each of Sumit’s threads with apologies for duplication!

    The anomalous nature of the “emergency” procedure arises from the very absence of imperium in arbitration and In part from the delays inherent in institutional arbitration. All an arbitral panel (let’s not call them a “tribunal”, that’s a word which gives a false impression of authority) can do is state what ought to be done.

    Even the claimed right to invite the arbitrators to draw unfavourable inferences is questionable; each arbitrator’s obligation is to find the truth from the evidence. Nothing may conflict with that. If a party’s conduct has resulted in additional losses, or in additional cost an appropriate award may be made, but arbitrators apply judgement to the issues; they do not judge persons. Only Judges who wield the Sovereign Power may do that.

    Arguably, for an arbitrator, nothing is more important than that “e”, or the lack of it, in the word “judgement”; that is what it’s all about.

    Moreover, where time is of the essence, the necessary transparency of the principle of Natural Law, audi alteram partem, is a serious handicap. The ability to make an ex parte application to the Court evades that limitation and is the reason why an attorney woul be wrong to suggest anything else.

    Arbitration is what it is. It is not a process at Law and, in my submission, any attempt to assimilate the two leads inevitably to uncertainty. Unfortunately, too many of us like the feeling that an illusion of power brings and we forget the dictum of Lord Acton on the subject.

    But this is the opinion of a layman and thus of no consequence!

    Reply
  2. Dear Panagiotis,

    thank you for this very interesting post! My answer in regard to the question why there is only modest usage of the emergency arbitrator would be that the rules (especially those of the SCC [2010] and those of the ICC [2012]) are relatively young and practitioners still need some “warm up”. Moreover, it is a tool for very exceptional circumstances in which the order is so urgent that it cannot await the constitution of the arbitral tribunal. Such an extreme urgency is rarely to be demonstrated, I think.
    I would like to draw our attention to another interesting question in connection to the establishment of an emergency arbitrator through arbitration rules: the involvement of a state party to the dispute. Especially in the case of the SCC rules it is not unlikely that a state party gets confronted with an emergency measures as these rules do apply the Annex of the emergency arbitrator retroactively to arbitration agreements that have been concluded before 2010. In my opinion this is to some extent problematic because a state could always declare the emergency order an act ultra vires because no consent has been given to the amendments of 2010.
    I was also wondering if ICSID could introduce such a tool via its arbitration rules. There is de facto no chance to request an order for provisional measures between the initiation of the ICSID proceedings and the constitution of the tribunal and, thus, the party in urgent need of an order has to await the constitution of the tribunal (which takes in average 3 to 4 months). Recourse to national courts is only possible if there is an express agreement according to Rule 39 (6) of the ICSID arbitration rules but such an agreement practically does not exist. In consequence, there is a lacunae in the protection system of ICSID which needs to be closed. As you might know, an amendmend of the ICSID Convention is not a viable solution and therefor I see the only possibility in amending the current arbitration rules.

    To conclude, I agree with you that the emergency arbitrator is a very useful tool to create a more autonomous arbitral process but I think there are a lot of unresolved issues that need further discussion. Comments are very welcome!

    Best, Ina

    Reply
  3. Panagiotis Chalkias

    Dear Ina,

    Thank you for this useful comment. I agree that the retroactive application of the SCC Emergency Arbitrator Rules is problematic in terms of consent, especially when a State is involved. This is why the new ICC Rules avoided this approach, by providing in article 29 (6) (a) for the application of the Emergency Arbitrator Provisions only after the date on which the new amendments came into force (1st January 2012). Furthermore, article 29 (5) denominates as parties either the signatories of the arbitration agreement under the Rules that is relied upon for the application, or successors of such signatories. This way, the emergency arbitrator proceedings “are excluded from treaty-based investment arbitrations, since they are not based on a singed individual arbitration agreement” (Nathalie Voser, Overview of the Most Important Changes in the Revised ICC Arbitration Rules, ASA Bulletin, Kluwer Law International 2011 Volume 29 Issue 4, pp. 783 – 820).

    ICSID’s reaction in this respect is highly awaited.

    Reply
  4. Thanks Panos for this interesting post. I notice that some of the institution rules empower the emergency arbitrator to ‘award’ or ‘order’ interim relief. Besides enforceability, I cannot think of a reason why this should be. Any ideas?

    Also, while I understand that the court determines ‘finality’, I wonder if this is appropriate. After all, the emergency arbitrator (or subsequently, the arbitral tribunal) has the benefit of hearing the parties and coming to a reasoned conclusion of characterizing his (its) decision. Deference may be appropriate here?

    Reply
  5. Panagiotis Chalkias

    The Swiss Chambers of Commerce released recently the revised version of the Swiss Rules of International Arbitration (https://www.swissarbitration.org/sa/download/SRIA_english_2012.pdf). Article 43 is of particular importance, since it introduces the emergency relief procedure. This procedure will be available to the parties as of June 2012, unless the parties have agreed on the retroactive application of the revised Rules (art. 1.3). However, the question remains: will this trend become a practical and trustworthy tool for arbitration practitioners?

    Reply

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