Gerald Metals SA v. The Trustees of the Timis Trust & Others [2016] EWHC 2327.

Background

Having commenced arbitration in London against the Trustees of the Timis Trust under the Arbitration Rules of the London Court of International Arbitration (LCIA Rules), Gerald Metals applied to the LCIA Court to appoint an emergency arbitrator or expedite formation of the tribunal, with a view to preserving the Trust's assets.

The LCIA Rules provide for appointing an emergency arbitrator if there is an "emergency" (Article 9B), and for the expedited formation of the tribunal if there is "exceptional urgency" (Article 9A). However, in light of undertakings from the Trustees not to dispose of assets other than for full market value and at arm's length, and to give seven days' notice before disposing of any assets worth more than 250,000, the LCIA Court refused Gerald Metals' applications.

Gerald Metals therefore applied to the English Commercial Court for a freezing injunction (and related information about the assets) under Section 44 of the Arbitration Act 1996 (the Act).

Section 44(3) provides that:

"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"

(emphasis added).

However, Section 44(5) states that: "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."

The Commercial Court Judgment

Mr Justice Leggatt rejected Gerald Metals' application, suggesting that if the case was not sufficiently urgent for relief under Articles 9A or 9B of the LCIA Rules, the case was not sufficiently urgent for the court to grant relief under Section 44(3) of the Act. Furthermore, by Section 44(5), the court can only act if the powers of the arbitral institution and the tribunal to be constituted are inadequate or cannot be exercised. In this case, Gerald Metals had sought assistance from the LCIA, but had been refused. The LCIA's powers were not said to be inadequate.

Mr Justice Leggatt noted that paragraph 9.12 of Article 9B of the LCIA Rules states that:

"Article 9B shall not prejudice any party's right to apply to a state court or other legal authority for any interim or conservatory measures before the formation of the Arbitration Tribunal; and it shall not be treated as an alternative to or substitute for the exercise of such right."

However, he did not consider that this gave parties a free choice as to whether to seek relief from the LCIA or the court. He simply confirmed that Article 9B should not prevent a party from applying to the court in appropriate cases.

Comment

Some commentators have expressed concern that this decision marks a narrowing of access to the English courts for interim relief in support of arbitrations. However, the essence of this case was that no interim relief was really necessary. The case was not urgent enough under the LCIA Rules and so, the tests being very similar, the case was not urgent enough for the court to intervene either.

Mr Justice Leggatt did, however, correct those who previously believed that parties had a free choice whether to apply to the arbitral institution for interim relief or the English court. He pointed out that, in line with the parties' selection of arbitration to resolve their dispute, and under Section 44(5) of the Act, the court should only intervene

"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".

Importantly, this decision does not affect the availability of relief from the English court when relief is really needed -- if a tribunal or emergency arbitrator would not be able to act sufficiently quickly or effectively (for example, because the application must be made ex parte, or the relief must bind third parties).