When parties agree on arbitration, their very aim is to avoid court proceedings as parties prefer arbitration due to its flexibility. In other words, arbitration is capable of adopting to different situations, taking advantage its flexibility and increasing its ability to answer the demands of international trade.

International arbitration has been a balance between national laws and party autonomy. The latter is the corner stone of arbitration and enjoys broad international recognition.

Parties agree to submit to arbitration under their preferred institutional rules at the time of enacting the arbitration agreement or at the commencement of the arbitration. In submitting to arbitration, the parties normally want to submit to an effective dispute resolution mechanism. Hence, it can be assumed that they want to benefit from any improvements made to the arbitral rules chosen.

WHAT EXTENT EMERGENCY ARBITRATION CAN FULFILL THE EXPECTATIONS OF THE PARTIES

There are also signs that countries and arbitration institutes can be quick in amending their laws and rules in order to attract foreign parties to arbitrate in their country.

Emergency arbitration offers the applicant a necessary way to secure his rights. Arbitrators give measures that serve to preserve or protect one of the parties rights.

More recently, arbitral institutions have stated developing emergency procedures to assist parties in circumstances where they need urgent interim relief before an arbitral tribunal has been formed.

Emergency arbitration may be applied even before commencement of the arbitration. Immediate provisional measures can be granted before the commencement of the arbitration.

A party in need of urgent interim measures of protection that can not await the constitution of any arbitral tribunal may apply for the appointment  of emergency arbitrator.

In order to meet requirement of ‘’extra urgency’’, the endangering action must be taken before the tribunal to grant interim measures.

The relief must be exceptionally urgent and cannot await the fast track constitution of the tribunal or the slow pace of national courts. Especially where the measure may be sought before the arbitration is filed.

Whilst the rise of emergency arbitration procedures certainly adds another level of flexibility and autonomy to parties seeking the resolve disputes, the equality of the parties and their reasonable opportunity the present their cases during the emergency arbitration is vital to the process.

An emergency arbitrator has, mostly, similar powers to grant interim measures to the actual tribunal.

The arbitrator powers to grant interim measures is ultimately based on the provision of the law of the seat rather than party autonomy and transnational arbitral legal orders. Emergency arbitrators may refer to international arbitration practices instead of domestic law.

Nowadays, the tribunals power to grant interim measures based on the parties agreement is widely recognized.

Arbitrators shall not grant relief that goes beyond what the applicant has requested. If the arbitrator considers granting a different relief than what has been requested, they should express the possibility so that it does not come as a surprise for parties.

An emergency arbitrators decisions are merely interim orders and do not prejudge the case. It doesn’t have any effect on the final award.

The emergency arbitrator shall also have a prima face jurisdiction, meaning if there is manifestly no valid arbitration agreement, the application for relief must be dismissed.

In the case of general precautionary measures, the court must ex effico see that relief is proportionate; the measures must be reasonable. The court must consider in the assessment of proportionality, the individual circumstances of the counterparty, such as, inter alia, economic capacity and reparability of the possible damage caused to the counterparty, as well as the relationship between the parties.

The emergency arbitrator invites the parties to participate in a telephone or conference call to establish a timetable for the proceeding, in order to give the respondent an adequate opportunity within the emergency proceedings.

The arbitrator has prima face jurisdiction over the substantive matter. A reasonable possibility that the claimant would succeed on the merits of the claim on a prima face and urgency is a risk of irreparable harm that can be prevented by interim measures. Having found the claimant had failed to identify a contractual right to due diligence and thus not established a prima face on merits, the emergency arbitrator can dismiss the application for interim measures.

The application is dismissed because the claimant has not shown the threat of the respondent transferring assets or any harm caused to the claimant by the possible transfer of assets.    

Interim measures may come in the form of an order or an award. The majority of institutes permit the emergency arbitrator to choose between an order and award. Historically, the interim measures are not ‘’final and binding’’ in the sense of the New York Convention, but there has been tendency towards accepting interim measures as enforceable awards.

UNCITRAL Rules, Article 26/3-a-b, discuss the utilization of interim measures.

Similarly, in the 1990’s, the International Chamber of Commerce launched its ‘’PreeArbitral Referee Procedure’’.

Pursuant to Article 29 of the ICC Rules of Arbitration

‘’Arbitration provisions shall not apply if the arbitration agreement under the rules was concluded before 1 January 2012’’

CIETAC established the CIETAC Hong Kong Arbitration Centre as its first arbitration centre in mainland China. CİETAC Hong Kong has been administering cases since 1 January 2015, when the 2015 version of the CİETAC arbitration rules came into force. Accordingly, Hong Kong seated tribunals may grant emergency relief.

In CIETAC Arbitration rules Article 23/2, in accordance with the applicable law or agreement of parties, a party may apply to the arbitration court for emergency relief pursuant to the CIETAC  emergency arbitrator procedures. The emergency arbitrator may decide to issue an order or award as necessary, or any other appropriate emergency measures. The decisions of the emergency arbitrator shall be binding upon both parties according to CİETAC Rules. A party requiring emergency relief may apply for the emergency arbitrator procedures based upon the applicable law or agreement of the parties. An emergency arbitrator shall not represent either party and shall remain independent of the parties and treat them equally. The decisions of the emergency arbitrator shall be made within fifteen days from the date of the arbitrator’s acceptance of the appointment.

As per Article 74 of the China Maritime Arbitration Commission Arbitration Rules:

‘’Unless otherwise agreed by the parties, the arbitral tribunal has the power to order appropriate interim measures at the request of a party. Where the arbitral has not yet been formed a party may apply for emergency relief pursuant to the CMAC Emergency Arbitrator Procedures.”

In ISTAC Rules, a request for an emergency arbitration must be submitted before the dispute has been referred to an arbitral tribunal. In this case, an emergency arbitrator is appointed within two business days from the date of the application being received. The decision of the emergency arbitrator(s) is made within seven business days.

The Stockholm Chamber of Commerce is one of the arbitration institutions in the world that provides for emergency arbitration proceedings.

In Swedish law, interim measures are granted by rendering a seperate award. The Stockholm Chamber of Commerce established a robust emergency arbitration mechanism which sees the appointment of emergency arbitrator within 24 hours and provides the emergency arbitrator to conduct the proceedings as she or he sees fit.

The Rules of the Stockholm Chamber of Commerce allows a party in need of prompt interim relief to receive a decision from an emergency arbitrator if the tribunal had yet been constituted.

A party may apply for appointment of emergency arbitrator before the dispute has been referred to an arbitral tribunal. The application may thus be made either before the initiation of regular arbitral proceedings or while the case is pending before the Stockholm Chamber of Commerce Secretariat or the board. The appointment of an emergency arbitrator must be conducted before the initiation of regular proceedings.

The Stockholm Chamber of Commerce appoints an emergency arbitrator the day after receiving the application. In accordance with Article 37 of the SCC rules, an emergency arbitrator may grant any interim measures it deems appropriate.

An emergency decision on interim measures shall be made no later than five days from the referral of the case to the emergency arbitration.

The SCC has emphasized that the claimant must show that the harm which is to be prevented by that measure is considered to be irreparable and of an urgent or imminent harm.   

In a case administered by the SCC, an Israeli claimant seeking an injunction restraining a Georgian respondent from receiving pursuant to bank guarantees. The Claimant had provided the bank guarantees for its performances in a building project. The emergency arbitrator found the claimants request to substantiated but denied the relief requested based on the assessment that no irreparable harm would be caused nor was this matter of an urgent nature. The decision was issued on the fifth day after receiving the application.

In another matter administered by the SCC, the claimant was an on Australian company distributing electronic products. The respondent was a British company whose products were distributed by the claimant. The dispute arose from a distribution agreement. The respondent had terminated the agreement on the basis of unpaid royalties. The claimant challenged the termination and requested the emergency arbitrator issue an order restricting the respondent from: (1) taking any action pursuant to the notice of termination, (2) taking any measure which had the effect of terminating the distribution agreement, (3) suspending or ceasing the supply of products and services to the claimant and (4) appointing another distributor for products to which the claimant had exclusive distribution rights under the distribution agreement.

The emergency arbitrator considered that:

‘’Absent of a definition in the applicable rules what interim measures mean, it seems pertinent in an international dispute refer Article 17(2) of UNCITRAL Model Law on International Commercial Arbitration rather than to entirely rely on domestic concepts developed in the law of the forum.”

The arbitrator noted that Article 17(2) was in line with Swedish Law. First, the arbitrator found that some of claimants requests which framed the application, did not meet the requirements and thus, did not qualify as interim relief. Second, the emergency arbitrator considered whether the remaining requests – those that sought to restore the status quo – met the conditions for granting interim relief pursuant to Article 17 of the UNCITRAL Model Law. The arbitrator found it necessary only to analyze one of the conditions, namely whether the claimant had established that there was a reasonable possibility it would  succeed on the merits of claim. The emergency arbitrator found the claimant had not shown such a reasonable possibility of success. Based on submissions, the arbitrator found that the respondent had a material claim for royalty payments and the balance of probabilities was that the respondent had to right to terminate the distribution agreement. Thus, the emergency arbitrator found that claimant had failed show reasonable possibility of success on the merits of the claim and dismissed the remaining requests for interim measures.

CONCLUSION

Nowadays, emergency arbitration is attractive to parties who to apply the dispute resolution by Ad-Hoc or institutional arbitration. The majority of arbitral institutes have implemented some form of emergency arbitration proceedings, which parties can lean on when in urgent need of interim measures.

If you require an arbitrator for emergency arbitration proceedings, please click here to view our roster of arbitrators, or contact us for assistance in selecting an arbitrator for your dispute.

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Author: Osman Tekin