Interim measures prior to constitution of arbitral tribunal: a Dutch perspective

Introduction
Emergency arbitral proceedings
Summary arbitral proceedings
Comment

Introduction

Urgency requires swift action. Before a dispute is brought to arbitration and an arbitral tribunal is constituted, one of the parties may want to ensure that the status quo is maintained or restored, that certain actions are taken or refrained from being taken, or that evidence is preserved. In arbitral proceedings, parties urgently requiring such interim measures can turn to the tribunal under most arbitration rules. If the arbitral tribunal has not yet been constituted, parties can turn to the competent state courts. However, this is not always an attractive option. The party may wish to keep the dispute confidential or the party may be hesitant to approach a foreign court, fearing that the national court of the country where the measures are needed is not sufficiently efficient or arbitration friendly.

In order to address this issue, a number of arbitration institutions (eg, the Stockholm Chamber of Commerce, the American Arbitration Association and the Singapore International Arbitration Centre) have made it possible for parties to request interim measures prior to the constitution of the arbitral tribunal from a so-called 'emergency arbitrator'. More recently, the International Court of Arbitration of the International Chamber of Commerce (ICC) and the newly established Panel of Recognised International Market Experts in Finance (PRIME Finance) have also followed this trend.

The Dutch Arbitration Act (1) further provides parties with the possibility to request interim measures prior to the constitution of the tribunal in arbitration with a seat in the Netherlands. Parties can obtain such measures from an arbitral tribunal or sole arbitrator in summary arbitral proceedings. However, there are some important differences between emergency arbitral proceedings and summary arbitral proceedings, which are important when drafting arbitration agreements. This update explains the different proceedings.

Emergency arbitral proceedings

Under the ICC and PRIME Finance arbitration rules,(2) parties can request the appointment of an emergency arbitrator if interim measures are so urgently required that they cannot await the constitution of the arbitral tribunal. The president of the ICC International Court of Arbitration appoints the emergency arbitrator, normally within two days of a party's request. PRIME Finance appoints an emergency arbitrator within 72 hours of receipt of the application. Under both sets of arbitration rules, in principle the emergency arbitration must be conducted and decided within 15 days of the date on which the file is transmitted to the emergency arbitrator. Meanwhile, within 10 days of filing its request, the party requesting emergency relief must also initiate arbitral proceedings on the merits. If the party fails to do so, the emergency arbitral proceedings will be terminated and any decision rendered will cease to be binding, unless the emergency arbitrator has extended the 10-day period.

The decision of the emergency arbitrator will take the form of an order. The question is whether such an order can be enforced against an uncooperative party in third countries under the New York Convention. In principle, this is not the case, since under the New York Convention only final arbitral awards are enforceable. Nevertheless, in deciding whether a decision is enforceable, the courts in some countries tend to give credence to the substance of the decision and not to the form of the decision. Therefore, insofar as an order constitutes a final decision, state courts in those jurisdictions may allow its enforcement.(3)

However, where orders granting interim measures do not qualify as final decisions, they cannot be enforced in third countries. In such circumstances, a party is dependent on the willingness of the other party to comply voluntarily with the order for interim relief. This may be different in countries that have adopted the revised United Nations Commission on International Trade Law Model Law. Article 17H of the Model Law provides: "An interim measure issued by an arbitral tribunal shall be recognized as binding and, unless otherwise provided by the arbitral tribunal, enforced upon application to the competent court". There are other jurisdictions that have provisions to that effect in their national arbitration acts (eg, Switzerland). Under the Dutch Arbitration Act, only final or partial final arbitral awards are enforceable.(4) Orders and interim arbitral awards are not. In the absence of any national rules providing for enforcement of interim orders, parties may encounter obstacles when trying to enforce orders against uncooperative parties.

Summary arbitral proceedings

If the seat of arbitration is in the Netherlands, the parties may authorise an arbitrator to grant interim measures in summary arbitral proceedings prior to the constitution of the tribunal. The Arbitration Act provides for this possibility in addition to the right of a party to request conservatory measures from the court or interim measures from the court in summary proceedings. However, taking into account all circumstances, the Dutch court may decline jurisdiction and refer the matter to summary arbitral proceedings.(5) The Netherlands Arbitration Institute (NAI) and PRIME Finance provide for summary arbitral proceedings in their arbitration rules if the place of arbitration is in the Netherlands.(6) By choosing to arbitrate under NAI arbitration rules the parties also agree to summary arbitral proceedings unless they have opted out of this route.(7) This is different under the PRIME Finance Arbitration Rules, where summary arbitral proceedings are available only if the parties have expressly opted for these proceedings. In arbitrations under the auspices of PRIME Finance with the seat in the Netherlands, prior to the constitution of the tribunal, parties thus have the choice to request interim measures in emergency arbitral proceedings or in summary arbitral proceedings (which are referred to in the PRIME Finance arbitration rules as 'referee arbitral proceedings').(8)

Interim measures in summary arbitral proceedings can be requested if there is prima facie evidence that:

• the matter is appropriate for the requested relief;
• the need for relief is urgent; and
• the balance of the parties' interests favours the measures requested.(9)

The requirement that the interim measures cannot await the constitution of the tribunal, as prescribed in respect of emergency arbitral proceedings, does not apply. The arbitrator who will decide on the request is appointed by PRIME Finance within five days. Similarly, the NAI administrator appoints an arbitrator within a matter of days. In NAI summary arbitral proceedings, the arbitrator immediately determines the date of the hearing. An exchange of written submissions takes place only if the arbitrator so determines. Counterclaims can be filed until the date of the hearing. In the summary arbitral proceedings under the rules of PRIME Finance, the defendant must file a response to the request within 10 days. In this response the defendant may also submit counterclaims. As in NAI proceedings, the arbitrator in PRIME Finance proceedings promptly fixes the date for the hearing and written memorials are submitted only if the arbitrator so determines. The Arbitration Act and the respective arbitration rules do not prescribe a specific period within which a decision is to be rendered, except that it is to be rendered as soon as possible after the hearing. NAI summary arbitral awards are usually given within a few weeks. No summary arbitral awards have yet been rendered under the rules of PRIME Finance. Unlike emergency arbitral proceedings, the parties are not required to initiate arbitration on the merits. Moreover, if parties jointly request, the arbitrator in NAI summary arbitral proceedings can even render a decision on the merits.(10)

Most significantly, the decision rendered in summary arbitral proceedings constitutes an arbitral award.(11) If a final decision is taken on some or all issues submitted to the arbitrator, it is a final or partial final award. Dutch law permits the rendering of a final award on a claim for interim relief but the decision in summary arbitral proceedings will not predetermine the decision on the merits. The arbitral tribunal in the arbitration on the substance may thus reach a different decision. Final or partial final awards in summary arbitral proceedings differ from orders given in emergency arbitral proceedings in that they are enforceable in the Netherlands.(12) Although debated, on the basis of the Arbitration Act a decision in summary arbitral proceedings is an arbitral award as meant in Article I of the New York Convention, and thus is also enforceable outside the Netherlands in other New York Convention contracting states.(13)

The possibility of summary arbitral proceedings has been available for a long time in the Netherlands and is regularly used by parties. Approximately 30 summary arbitral proceedings have been concluded under the NAI Arbitration Rules between 2009 and 2010.(14)

Comment

It is a welcome addition that the ICC and PRIME Finance arbitration rules include the possibility to obtain interim measures prior to the constitution of the tribunal. It is too early to predict whether the emergency arbitral proceedings under these rules will be a success. That emergency arbitrators only grant orders and not awards may keep parties from pursuing this route. The requirement that the party requesting the emergency relief is to initiate proceedings on the merits within 10 days from its request may also deter parties. However, these potential obstacles can be avoided. If parties choose for the seat of the arbitration to be in the Netherlands, they can opt for the already tried and tested summary arbitral proceedings under the Arbitration Act. For complex financial disputes, in relation to which urgent relief is often essential, parties have the possibility to obtain summary arbitral awards that may be enforced not only in the Netherlands but also in other New York Convention contracting states. This could, for example, become the preferred route in derivative disputes which, as of the beginning of 2012, can also be brought before specialist panels under the PRIME Finance arbitration rules.

For further information on this topic please contact Juliette Luycks or Stana Maric at Clifford Chance LLP by telephone (+31 20 711 9000), fax (+31 20 711 9024) or e-mail ([email protected] or [email protected]).

Endnotes