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05 July 2018
In recent years, many of the leading arbitral institutions have amended their rules in order to make arbitration more responsive to users' needs. A key development has been the introduction of emergency arbitrator procedures, which enable parties to obtain urgent relief before the substantive tribunal is formed. These new developments are attracting significant attention from parties and arbitrators – but have enforcement mechanisms kept pace?
An important consideration for many parties is the ability to obtain immediate interim relief once a dispute arises, either to preserve the status quo or prevent the other side from continuing the breach in question pending the final resolution of the dispute. In the arbitration context, there are several avenues for obtaining interim relief.
In most jurisdictions, the courts retain residual authority to grant interim measures in support of arbitration. Obviously, some of the benefits of arbitration (eg, confidentiality and efficiency) may be lost if a party is forced to pursue interim relief in open court. Some parties therefore prefer to seek interim measures within the arbitral process.
Once appointed, a tribunal will also generally have wide powers – akin to those of a court – to grant interim relief.
The difficulty in some instances is that the appointment of the substantive tribunal can take months, particularly if one party is obstructive or raises challenges to the nominated arbitrators.
In response, many leading arbitral institutions have introduced emergency arbitrator procedures which seek to close that gap by allowing parties, in emergency situations, to obtain urgent arbitral relief before the substantive tribunal is formed. Under emergency arbitrator procedures, a sole arbitrator is appointed by the arbitral institution on an expedited basis to determine applications for interim relief that cannot wait for the formation of the substantive tribunal. Arbitral institutions that have adopted emergency arbitrator mechanisms include the International Chamber of Commerce (ICC) and the International Centre for Dispute Resolution (ICDR).
Generally, the relevant arbitral rules provide that decisions of emergency arbitrators are interim‑binding, in that they can later can be varied or suspended by the substantive tribunal once formed. In some instances, such interim measures may expire by default after a certain period.
Depending on the applicable arbitral rules or law, an emergency arbitrator (or arbitral tribunal) may grant interim relief in the form of:
The ICC, for example, requires that an emergency arbitrator's decisions take the form of an order. This circumvents the ICC's 'scrutiny' process for awards, which would delay the issuance of the emergency decision. By contrast, the ICDR rules permit a decision in the form of either an order or an award.
Despite the interest and seeming demand for such relief, there are some questions regarding the enforceability of arbitrator interim measures. Key questions arise from the very nature of the relief; that it is interim binding and, in the case of emergency arbitrator decisions, made by someone other than the substantive tribunal. The form of the relief can also play a part – particularly where arbitrator interim relief takes the form of an order rather than an award.
In international commercial arbitration, the key enforcement mechanisms are the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (known as the New York Convention) and the applicable domestic arbitration laws, many of which are based on the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration.
The New York Convention is silent on the question of arbitrator interim awards and orders. On the face of it, the convention applies only to 'awards', thereby seeming to exclude arbitrator orders – interim or otherwise. Moreover, while there is no definition of 'award', finality is considered an essential characteristic of an award in many jurisdictions – not least because the convention provides that a party may resist enforcement of an award on the ground that it is not yet 'binding'. As such, this raises questions over the enforceability of orders and awards that are only interim‑binding.
Unlike the New York Convention, the original Model Law expressly addresses interim relief by empowering a tribunal to order interim measures. However, it does not address the enforcement of such measures, instead leaving to national courts' discretion whether to provide assistance in that regard. The Model Law was updated in 2006 to address, among other things, the enforceability of arbitrator interim measures. The amended Model Law empowers tribunals to grant interim relief in both the form of an award and in "another form", and provides that such measures will be as binding and enforceable as any other award. However, although a preliminary order will be binding on the parties, it will not be subject to enforcement by a court (and does not constitute an award).
Although the amended Model Law offers some helpful clarity, it does not perfectly resolve all issues. First, it fails to define 'arbitral tribunal', which leaves open the question of whether an emergency arbitrator falls outside the definition. More importantly, the 2006 amendments have not been widely adopted. More than 100 jurisdictions have implemented domestic arbitration laws based on a version of the Model Law, but less than half of those have adopted the 2006 revisions. Additionally, a number of domestic arbitration laws – including those in some of the leading seats of arbitration – are not based on the Model Law at all. In fact, few domestic arbitration laws address the enforceability of emergency arbitrator relief.
In the absence of express provisions, it is up to the domestic courts to determine whether an emergency arbitrator decision – be it in the form or an award or an order – is enforceable.
Domestic courts' approach to this question varies across jurisdictions. In some, courts have found that where arbitrator interim measures finally dispose of certain issues, they are enforceable as awards.
Some courts that follow this approach will look at the substance of the measure rather than its form, enforcing both arbitrator order and awards.
The question remains whether interim relief granted by an emergency arbitrator is enforceable in the same fashion as interim relief ordered by the substantive tribunal.
Although there are encouraging signs that some jurisdictions are taking a pro‑enforcement approach to arbitrator interim relief, not all jurisdictions are heading in the same direction – and, of course, not all interim measures will 'finally' resolve some parts of a dispute. This leaves the enforcement of such measures uncertain, even in otherwise pro‑enforcement jurisdictions.
However, the bigger issue for users is that in many jurisdictions, there have been too few court decisions to reliably predict how emergency arbitrator decisions will be treated.
Given the patchwork approach globally, the enforcement of interim measures issued by arbitral tribunals remains inconsistent and uncertain. Until more proceedings to enforce emergency arbitrator decisions have come before courts – or until legislators decide to deal with the issue in domestic legislation – questions over the enforceability of arbitrator interim relief will remain.
The uncertainties associated with enforcement are an important issue for users to consider when deciding whether to seek relief from an emergency arbitrator or a court. It is critical that parties obtain local legal advice from the jurisdictions where enforcement will be sought before making a decision.
For further information on this topic please contact Martin Valasek at Norton Rose Fulbright LLP's Montreal office by telephone (+1 514 847 4747) or email (firstname.lastname@example.org). Alternatively, contact Jenna Anne de Jong at Norton Rose Fulbright LLP's Ottawa office by telephone (+1 613 780 8661) or email (email@example.com). The Norton Rose Fulbright LLP website can be accessed at www.nortonrosefulbright.com.
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