The Advent of Emergency Arbitration Provisions

In recent years, and in response to user demand, almost all of the world’s leading international arbitration institutions have changed their rules1 to allow parties to appoint an “emergency arbitrator”. An emergency arbitrator may, on an expedited basis prior to the constitution of the arbitral tribunal, hear and determine applications for urgent interim or conservatory measures that cannot await the constitution of the arbitral tribunal in accordance with the parties’ arbitration agreement. These developments have been necessary because of the weeks, or in some cases months, it can take for an arbitral tribunal to be constituted, and allow parties to seek quick and decisive interim action through the arbitral institution.

The rules all limit a party’s recourse to the emergency provisions where the interim or conservatory measures cannot await the constitution of an arbitral tribunal. This requirement of urgency necessarily prevents opportunistic parties from circumventing the procedural steps contained elsewhere in the respective rules by filing applications not properly requiring an emergency arbitrator.

The Concurrent Jurisdiction of National Courts

In such circumstances of urgency, it has historically been the position that the parties requiring urgent relief must obtain it from national courts. Despite the recent introduction of emergency arbitration provisions in various institutional rules, this concurrent jurisdiction of the national courts with that of the arbitral tribunal has continued to be respected.

In England, Section 44 of the Arbitration Act 1996 (the “Act”) gives the English courts the power to make orders in support of arbitral proceedings, including the preservation of evidence and the granting of interim injunctions2. Such relief can be applied for in circumstances where “the case is one of urgency”3, and the Act also requires that arbitral remedies are exhausted before the respective national court will grant orders in support of arbitration4.

The Gerald Metals Decision: English Court Clarifies the Court/Emergency Arbitrator Overlap

Until now, there had been some confusion as to whether and how emergency arbitrator provisions would affect the court’s jurisdiction under Section 44. Following last month’s judgment in Gerald Metals S.A. v Timis & Ors [2016] EWHC 2327 (CH), it now appears that emergency arbitrator provisions incorporated by reference into commercial parties’ agreements to arbitrate have had the effect of limiting the court’s Section 44 jurisdiction only to cases that are too urgent to wait for the appointment of an emergency arbitrator.

In Gerald Metals, the Claimant applied to the LCIA for the appointment of an emergency arbitrator, with a view to seeking emergency relief, including an order preventing the Respondent from disposing of its assets. The LCIA rejected the Claimant’s application after the Respondent gave certain undertakings not to dispose of any assets other than for full market value and at arm’s length, together with 7 days’ notice to be provided prior to disposing of any asset worth more than £250,000. The Claimant then applied under Section 44 of the Act to the English Commercial Court for a freezing injunction and associated orders to obtain information about the location and value of assets.

In dismissing the Claimant’s application for interim relief, Leggatt J held that the test of “urgency” – a pre-requisite for the granting of the relief – pursuant to the LCIA Rules was the same as that under Section 44. Given that the LCIA had already rejected the Claimant’s application for the appointment of an emergency arbitrator, the court was not entitled to intervene as a result of Section 44(5) of the Act, which prevents a court from acting unless an arbitrator/tribunal “has no power or is unable for the time being to act effectively”.

Leggatt J clarified further that the court may only act under Section 44 to grant such interim relief where the powers of a tribunal (appointed by way of the emergency provisions or otherwise) to grant interim relief are inadequate, or where the “practical ability” to exercise those powers is lacking.

Practical Implications of the Decision

Gerald Metals provides that where commercial parties have included an arbitration agreement in a contract, and the named arbitral institution contains emergency arbitrator provisions in its rules, a party seeking interim relief before the constitution of a tribunal must invoke the relevant emergency arbitrator provisions as opposed to a Section 44 application to court, unless the circumstances are too urgent even to wait for the appointment of an emergency arbitrator.

On the one hand, the primacy afforded to the emergency arbitration process by the English Courts is to be welcomed. The provisions reinforce commercial parties’ election to have their disputes arbitrated, even prior to the constitution of the main tribunal. That is subject to the parties having included such emergency arbitrator provisions by reference rather than “opting out” of them5, which will, particularly in light of the Gerald Metals decision, be an important consideration for parties negotiating arbitration clauses in their commercial contracts. In our experience, emergency arbitration procedures are typically expedient both under the ICC and LCIA rules.

However, crucially, doubts remain as to the enforceability of emergency arbitral decisions. The rules of the major institutions are somewhat vague with regard to the form of relief successful applicants are to benefit from. Only the ICC Rules specifically declare that the Emergency Arbitrator’s decision is to take the form of an ‘Order’6. Others refer to a ‘decision, order or award’7; ‘an order or award as deemed necessary’8; or an ‘emergency decision’9. This could lead to cases where parties argue there is no “practical ability” for an emergency arbitrator to exercise its powers and grant the interim relief sought (for example, because any decision would not bind third parties in the way that a court injunction would) meaning that the possibility of such relief being granted by the English Courts under Section 44 should remain available in appropriate cases.