The London Court of International Arbitration (“LCIA”) is one of a number of private institutions which publishes rules for the conduct of arbitrations and administers arbitrations conducted under those rules. The LCIA does not itself determine disputes between the parties, which will instead be determined by an arbitrator, or a tribunal comprising three arbitrators, who are appointed by the LCIA. Though it describes itself as a ‘court’, the LCIA is not a public body.
In 2013 a total of 290 arbitrations were commenced under the LCIA Rules. Those Rules have been in effect since 1 January 1998. The LCIA has now published new Rules which will apply to arbitrations commenced after 1 October 2014. This Article looks at one of the new provisions, which allows for the appointment of an ‘emergency arbitrator’.
Urgent applications under s.44 Arbitration Act 1996
When looking at the new emergency arbitrator provision, it is useful to have in mind when emergency relief will be available from the English court.
Section 44 of the Arbitration Act 1996 sets out powers which the court can exercise in support of arbitration proceedings as follows.
“(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings.
(2) Those matters are -
- the taking of the evidence of witnesses;
- the preservation of evidence;
- making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings -
- for the inspection, photographing, preservation, custody or detention of the property, or
- ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property; and for that purpose authorising any person to enter any premises in the possession or control of a party to the arbitration;
- the sale of any goods the subject of the proceedings;
- the granting of an interim injunction or the appointment of a receiver.”
It can be seen that a court can order some things which an arbitral tribunal cannot, because unlike an arbitral tribunal, a court does not just have jurisdiction over the parties to the arbitration agreement, but can also make orders which affect third parties.
A court can, therefore, order a witness to attend an arbitration hearing. A court can also make a ‘freezing’ order that a party’s assets not be moved or disposed of which will be binding not just on the party but, also, on others such as that party’s bankers.
Section 44(3), (4) and (5) set out when these powers may be used:
“(3) If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.
(4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.”
When the relief sought is aimed at preventing a party moving or disposing of assets or evidence, the application would usually be frustrated if the other party were to be tipped-off to the application before the order was granted. For this reason, such applications are usually heard by the court ex parte (i.e. without any notice to the party against which the order is being sought). If the ex parte application is granted, a with-notice hearing will usually take place within a few days to decide whether the order should be continued.
Emergency arbitrators in the new LCIA Rules
Many institutional rules (e.g. the ICC, SIAC and HKIAC) provide a procedure whereby a party can ask the institution to temporarily appoint an emergency arbitrator, who can then hear applications for urgent relief in the period before the tribunal has been appointed.
Historically, the LCIA Rules did not make any provision for the temporary appointment of an emergency arbitrator. Rather, since 1998, they have instead allowed for the “expedited formation” of the tribunal.
In a normal case which is subject to the LCIA rules, a party will submit its Request for Arbitration, the Respondent will then have 28 days to submit its response, and the LCIA Court will appoint the Tribunal “promptly after receipt … of the Response or, if no Response is received, after 35 days from the Commencement Date”.
Article 9 of the old rules provided that, in cases of exceptional urgency, on or after the commencement of the arbitration, any party could apply to the LCIA Court for the expedited formation of the Arbitral Tribunal. The LCIA Court could then abridge or curtail the usual time limits for the appointment of the tribunal.
In 2012 it was reported that, since the introduction of that Article 9 in 1998, there had been 95 applications for expedited formation, 44 of which were granted, 27 rejected and 24 did not require determination. 95 applications in 14 years, for an institution which presently handles just under 300 cases per year, shows the procedure is used relatively rarely.
The new 2014 rules retain the provision for expedited formation, in what is now Article 9A, but introduce a new Article 9B which provides for an emergency arbitrator procedure. Some points to note about this procedure are:
- The emergency arbitrator procedure applies by default whenever the parties have agreed that the LCIA Rules will apply, but parties can agree that the emergency arbitrator procedure will not apply.
- Article 9B is without prejudice to any party’s right to apply to a court for interim or conservatory measures.
- An emergency arbitrator may only be appointed “in case of emergency”.
- The party seeking to have an emergency arbitrator appointed must apply to the LCIA Court in writing and, at the same time, pay a special fee.
- The LCIA will then “determine the application as soon as possible in the circumstances”.
- “If the application is granted, an Emergency Arbitrator shall be appointed by the LCIA Court within three days of the Registrar’s receipt of the application (or as soon as possible thereafter)”.
- “The Emergency Arbitrator may conduct the emergency proceedings in any manner determined by the Emergency Arbitrator to be appropriate in the circumstances, taking account of the nature of such emergency proceedings, the need to afford to each party, if possible, an opportunity to be consulted on the claim for emergency relief (whether or not it avails itself of such opportunity), the claim and reasons for emergency relief and the parties’ further submissions (if any). The Emergency Arbitrator is not required to hold any hearing with the parties (whether in person, by telephone or otherwise) and may decide the claim for emergency relief on available documentation. In the event of a hearing, Articles 16.3 [hearing to be at any convenient geographical place], 19.2 [conduct of hearing to be organised in advance], 19.3 [reasonable notice of hearing] and 19.4 [hearing to be in private] shall apply”.
- “The Emergency Arbitrator shall decide the claim for emergency relief as soon as possible, but no later than 14 days following the Emergency Arbitrator’s appointment”.
- The emergency arbitrator “may make any order or award which the Arbitral Tribunal could make” but “Any order or award of the Emergency Arbitrator … may be confirmed, varied, discharged or revoked, in whole or in part by order or award made by the Arbitral Tribunal …”
Orders and awards
The fact that the emergency arbitrator can make an “award” serves to differentiate the LCIA’s emergency arbitrator procedure from that in the ICC Rules. Under the ICC Rules “the emergency arbitrator’s decision shall take the form of an order”and“the parties undertake to comply with any order made by the emergency arbitrator”.
The wording of the ICC Rules has given rise to an issue about whether an “order” issued by an emergency arbitrator under those rules is enforceable in the same way that an “award” is, because the ICC Rules appear to draw a deliberate distinction between “awards” and “orders”, and it is only “awards” which are enforceable under the New York Convention.
By making clear that the emergency arbitrator can issue an award, the LCIA avoids this issue. The emergency arbitrator’s award is an “award”, and is enforceable in the usual way (albeit that it is a “provisional” award, for the purposes of s.39 of the Arbitration Act 1996, since the LCIA Rules contemplate that the emergency arbitrator’s award can be set aside by the full tribunal).
How significant is the introduction of an emergency arbitrator procedure?
The possibility of appointing an emergency arbitrator potentially reduces the situations in which an arbitral tribunal “has no power or is for the time being unable to act effectively”, and so some applications which could previously have been made to the court under section 44 would instead have to be made to an emergency arbitrator.
The emergency arbitrator cannot make an order which binds third parties, and the rules would not seem to allow for the possibility of an ex parte application. Also, while the rules provide for the institution to appoint an arbitrator within a period of 3 days, and for the arbitrator to make a decision within 14 days of appointment - a total of 17 days - in a real emergency, one could go to court and obtain a decision at much shorter notice.
As such, there will still be many applications which would have to be made to the court under s.44.
In fact, it would seem that only a narrow range of interim relief applications would fall to be heard by an emergency arbitrator. The application must not be an application for a freezing order or similar relief which is only meaningful if made ex parte, and the matter must not be so urgent as to require an immediate decision. In either of those scenarios, it would be necessary to apply to the court under section 44.
But the application must still be urgent enough that the applicant cannot wait for the full tribunal to be constituted, either under the normal procedure (28+ days or 35+ days) or under the expedited procedure. It needs to be borne in mind that there will also be many cases where a respondent will be prepared to agree to refrain from doing whatever it is that the claimant wishes to prevent it from doing until the full tribunal has been appointed and can decide the issue - thus avoiding the need for an emergency arbitrator to be appointed, or for expedited formation.
For these reasons, one might have thought that there would be relatively little demand for emergency arbitrators and, of course, the LCIA has managed without them until now, and with relatively few parties using the existing expedited formation procedure. As such, while it is important to be aware that the.