Arbitration has been the preferred method of resolving international business disputes for many years, and its popularity appears to be growing. A critical reason for its success is the relative ease of enforcement of arbitral awards in a large number of jurisdictions, but other frequently-cited factors include speed of resolution, privacy and neutrality of forum.
In keeping with the expectations of modern commercial parties, recent revisions to the main arbitral institutions' rules give companies increased flexibility to seek interim or expedited relief whilst maintaining the traditional benefits of international arbitration. As we will explain below, two innovations in particular, namely emergency arbitration and expedited procedures, are likely to be particularly useful for resolving time-critical but relatively low-value, straightforward disputes in the context of on-going contractual relationships.
With its new arbitration rules, which entered into force on 1 October 2014 (the "2014 LCIA Rules"), the London Court of International Arbitration (LCIA) joined the International Centre for Dispute Resolution (ICDR), the International Chamber of Commerce (ICC), the Hong Kong International Arbitration Centre (HKIAC), the Singapore International Arbitration Centre (SIAC), the Stockholm Chamber of Commerce (SCC) and other major arbitral institutions in allowing businesses to seek the appointment of an "emergency arbitrator" ("EA") to grant interim relief before the full tribunal has been constituted. (For further information about the 2014 LCIA Rules, please see here.)
The SIAC emergency arbitration process has been one of the most used since its introduction in 2010. As of March 2014, SIAC had received 34 applications for emergency relief, of which 18 (62% of those heard) were successful; 11 were rejected; 3 were withdrawn; and 2 were pending. Under the SIAC Rules, an EA will be appointed within 1 day of receipt of the application, and the average time for issuance of an interim EA award has been 2.5 days; however, these timeframes vary between the different arbitral institutions.
Although it appears to be gaining popularity, parties should be aware of the limitations of emergency arbitration, in particular with regards to the enforceability of EA rulings. These limitations mean that emergency arbitration is most likely to be useful in the context of an on-going contractual relationship, for example, where a supplier is seeking to secure the continuation of a buyer's performance under a supply contract pending determination of the buyer's right to terminate that contract.
The main aim of the EA is to act quickly to preserve the status quo, so as to permit subsequent effective dispute resolution via the full arbitration process. The EA's rulings will not, however, bind the tribunal that is subsequently constituted, and they are ordinarily unlikely to be considered "final and binding" for the purposes of enforcement under the New York Convention. However, Singapore and Hong Kong have specifically amended their legislation to make EA awards enforceable within their jurisdictions, and it is expected that courts from certain jurisdictions such as England and the US may enforce at least some EA awards, given their existing powers to enforce interim awards issued by (non-emergency) tribunals.
Although there appears to be a high level of voluntary compliance with EA awards and orders (likely due to the concern that the arbitral tribunal will draw a negative inference from a party's refusal to comply, when deciding on the merits), this constitutes a significant limitation for emergency arbitration. A company may, however, still consider making an application for urgent relief to an EA rather than the national courts if confidentiality is particularly important and/or it cannot or is unlikely to obtain effective relief from the relevant national courts (for example, where they do not have the powers to grant interim relief in support of arbitration, or where they are unable to proceed with the speed required). In the interesting Indian case of HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studioz Limited and others, one of the parties obtained interim relief from an EA in Singapore restraining the other party from withdrawing any amounts retained in a bank account pending the outcome of the arbitration. Subsequently, while the Bombay High Court did not directly enforce the EA award, it passed reliefs in similar terms pursuant to the successful party's separate application under the Indian Arbitration Act (see our earlier post here).
Emergency arbitration will only be appropriate where urgent relief is sought, and an EA will be unlikely to grant interim relief where there is insufficient urgency. (For example, of the two applications for emergency relief made to the ICC in 2012, when its emergency arbitration procedure was first introduced, one was denied for lack of urgency.) Where the parties need issues resolved quickly, but not immediately, it may be preferable to wait until the tribunal is constituted then seek to expedite the arbitration rather than to apply for interim relief, given that the EA's rulings will not be binding on the tribunal.
Depending on the institutional rules adopted by the parties, it may be possible to obtain a final award in a period of between three to six months. This is generally achieved by restricting the tribunal to a sole arbitrator and/or by cutting or limiting procedural steps, for example removing oral hearings. As a result, expedited procedures are more suitable for claims involving smaller sums or straightforward issues.
Some institutional rules specifically provide for expedited procedures that are either automatically applicable in certain circumstances or when explicitly agreed to by the parties. For example, under the SIAC Rules (Rule 5.1), a party may apply for proceedings to be conducted in accordance with SIAC's expedited procedure: (a) if the amount in dispute does not exceed the equivalent amount of 5 million Singapore Dollars (approximately USD 4 million); (b) if the parties so agree; or (c) in cases of exceptional urgency. Under the LCIA Rules (Article 9A of the 2014 LCIA Rules), a party may request the LCIA to expedite the formation of the tribunal in the event of an "exceptional urgency".
Some institutional rules provide more generally that the parties may agree, or that the tribunal may decide, on shortened time limits. The LCIA Rules, for example, give the tribunal the power to abbreviate any time limit on the application from a party or on its own motion, but only after giving the parties a reasonable opportunity to state their views (Article 22.1(ii) of the 2014 LCIA Rules).
One of the key advantages of international arbitration over litigation is the flexibility it affords parties to agree on the processes and timelines for any arbitration. When entering into a new arbitration agreement, parties are advised to consider to what extent their choice of arbitral institution, seat and the number of arbitrators will allow them to apply for urgent interim relief or expedite proceedings, if required. For low-value contracts, parties may wish to agree from the outset on expedited procedures (or a presumption of expedition) that will automatically apply for disputes in respect of sums up to an agreed threshold, and restrict the tribunal to a sole arbitrator to allow for speedy constitution of the tribunal, whether through express drafting or their choice of institution (for example, the default position under most institutional rules provides for the appointment of a sole arbitrator save for high-value or complex disputes). It should be noted that once a dispute has arisen, it will be more difficult for the parties to reach any agreement on such matters, and a party's ability to push for speedy resolution of the dispute without the agreement of its counterparty will vary depending the terms of their arbitration agreement.