This article has been written by Achal Jain, pursuing the Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.
Emergency arbitration (EA) has arrived in the appearance of emergency relief, which is a new and upcoming concept in the area of arbitration suitable for parties who want to protect their interests such as assets or evidence that might not be protected or procured at a later stage. The parties who want to pursue emergency arbitration for resolving or applying for an urgent interim relief shall proceed as per the agreement executed between them. The proceedings pursuant to emergency arbitration can consist of either domestic or international arbitration that shall be conducted by an emergency arbitrator as per the agreement between the parties or as per their concurrence.
A short overview of emergency arbitration
Emergency arbitration (EA) provides a mechanism for disputing parties to resolve and apply for interim or emergency relief in case of urgency before an arbitral tribunal that has been formally constituted as per agreement between the parties to dispute. Once a party seeking the interim relief submits an application before an arbitral tribunal, such institute or tribunal in accordance with the rules provided therein appoints an emergency arbitrator to adjudicate or decide on the application within a period as prescribed in the rules of the tribunal which typically ranges from a couple of days to one or two weeks.
However, there are few things that need to be looked upon such as the qualification and understanding of the emergency arbitrators in relation to the complexity involved in a dispute between the parties. Emergency arbitrators must acquire the ability to quickly understand complex issues, ensure efficient proceedings, and should make rational and fair decisions with regard to the relief(s) sought by the parties.
Sometimes a party to dispute looks for a quick and urgent relief due to certain inevitable circumstances wherein the role of emergency arbitral comes into play when an unusual situation arises where there is an unavailability of an arbitral tribunal in place; and whereby time would be wasted in setting up an arbitral tribunal, subject to the needs and requirements of an arbitration agreement or rules laid by the institutions. ‘Traditional’ or ‘classical’ arbitration rules do not contain necessary tools for granting timely relief before the constitution of an arbitral tribunal. Resultantly, such delay would frustrate the original purpose of arbitration or even render the arbitration fruitless. The exponential growth of emergency arbitration in recent times shows that there has been a practical need to obtain urgent interim measures.
Notwithstanding, an order passed by the emergency arbitrator is not binding on the Arbitral Tribunal constituted in relation to any question or issue arising out of the dispute. Thereafter, a party aggrieved by an urgent interim relief rendered in form of an order by the emergency arbitrator can challenge such order before the Arbitral Tribunal constituted later for resolving the dispute as referred by the parties or the Arbitral Tribunal may itself reverse such order on its own initiative.
Alternative dispute resolution in construction and investment
In ADR, negotiation is a process wherein the parties and their legal representatives seek to resolve the dispute by reaching at an agreement either through written correspondence, email, telephone, or a meeting between all concerned stakeholders. Negotiations can take place on a “without prejudice” basis. In negotiation, parties possess control over the result as they choose to decide whether the suggested terms are acceptable to them, or they may give instructions and accept such agreement as arrived. However, in negotiation, there is no neutral party to manage the process which may lessen the chances of arriving at an agreement. But in industry sectors such as construction and investment which involves expert participants who identify and take calculated risks, the percentage to reach a settlement through negotiation becomes very high.
It is a process that is similar to negotiation. The difference between mediation and negotiation is that the mediation is done with the assistance of a third person mediator who is a trained professional that is appointed upon the approval of both parties to assist them in resolving their dispute. There are two main categories of mediation: facilitative mediation and evaluative mediation. In both, the parties are given a chance to put their point of view. In facilitative mediation, the mediator facilitates an agreement between the parties. In evaluative mediation, the mediator supplies the parties with an assessment of the merits and the likely outcomes.
Mediation can be arranged very quickly and is logistically easier and significantly cheaper in comparison of other components of ADR. As many construction and investment disputes tend to arise between businesses, the advantage of mediation is that it is a confidential process and therefore, it can result in a confidential settlement, if the parties wish so, which can also be helpful in protecting brand image and reputation of the parties while not causing loss of its customer and confidence of clients.
Whenever any dispute arises relating to an ongoing contract between parties (such as a construction contract or investment contract), it is imperative that the parties in dispute are able to swiftly resolve their disputes without risking the stability of contract value.
Adjudication is a process wherein the parties have agreed, at the time of entering into the contract, to refer any dispute between parties to a third party i.e. an adjudicator for a relevant and favourable decision instead of terminating the contract and approaching costly litigation. Oftentimes, disputes pertaining to construction and infrastructure industries are referred to the adjudication as parties have always been able to agree to refer their dispute to an adjudication process. Furthermore, it has been noted that the adjudication proceedings in ADR renders a positive outcome, so, in 1996, statutory adjudication was adopted and introduced in England and Wales.
ADR compared with litigation in Construction and Investment disputes
Any type of dispute irrespective of the industry sector needs willingness and communication for settling and reaching an appropriate solution. ADR can help with both. The processes involved in different components of ADR give the parties indulged in any commercial dispute a chance to communicate openly for a better understanding of the dispute amongst them, and to approach an independent third-party for evaluating their strengths and weaknesses of their respective positions.
Generally, the construction and infrastructure industry sector-based disputes are highly complex and technical in nature. They, at times, generate complex points and issues which encompass specialised forms of contracts, agreements and it also involves multiple parties, thus, leaving it more problematic to reach an agreement or to use ADR efficiently and effectively. Nonetheless, these disputes are finally adjudicated and decided by the arbitrators and judges.
ADR is more attractive and suitable for the construction and investment industry concerning risk management. Resolving disputes in this sector by litigation can be a costly affair in comparison to ADR as it entails many stages such as examination of the plethora of documents and expert evidence depending upon the complexity of matter which may take a longer period to resolve in court.
Emergency arbitrator proceedings under the ICC Rules
The ICC Arbitration Rules offer an easy procedure wherein parties that wish to seek urgent relief depending upon their needs can approach ICC to constitute an emergency arbitral tribunal for seeking emergency measures. The procedure offered by ICC allows a short-term solution for parties that need urgent interim relief and are unable to hold till the constitution of an Arbitral Tribunal. Any emergency relief rendered by the tribunal is a form of an order, and such order may be challenged by the aggrieved party later, once the Arbitral Tribunal is constituted.
Scope of the Rules
A party who needs urgent interim reliefs (emergency measures) that cannot wait for the constitution of an Arbitral Tribunal may file an application to the secretariat of the ICC International Court of Arbitration (secretariat) under Article 29 of the Rules in Appendix V (emergency arbitrator provisions). The provisions of the emergency arbitrator are applied only to such parties that are signatories to the arbitration agreement.
The emergency arbitrator provisions do not apply:
- In case the arbitration agreement under the Rules was agreed upon before 1 January 2012;
- In case the parties have opted out of the emergency arbitrator provisions (see the Standard ICC Arbitration Clauses); and
- In case the parties have agreed to move ahead with another pre-arbitral procedure that renders for the granting of conservatory, interim or similar measures.
Following is the procedure pursuant to Appendix V of rules of arbitration of ICC for emergency arbitration:
- In Article 1 of Appendix V, an application pursuant to Article 29 of the Rules of Arbitration of ICC shall be submitted to the secretariat at any of the offices as prescribed in internal rules of the Court in Appendix II to apply for emergency measures.
- Appointment of the emergency arbitrator and transmission of the file shall be done according to Article II.
- If a party wishes to challenge the appointment of an emergency arbitrator, it shall be made within three days from the receipt of the notification of the appointment of an emergency arbitrator under Article III.
- Article IV determines the place of emergency arbitration, when parties to dispute agree upon the place of arbitration, such place shall be the place of emergency arbitration proceedings pursuant to Article 18(1) of the Rules.
- Article V states that the appointed emergency arbitrator shall set up a procedural timetable to be followed in emergency arbitration proceedings, normally such timetable is set up within two days from the day of transmission of the file pursuant to Article 2(3).
- In emergency arbitration, a decision passed by the emergency arbitrator shall take the form of an order as per Article 29(2) of the Rules.
The Order passed by the emergency arbitrator shall decide whether the application for emergency interim relief is admitted and whether the emergency arbitrator has jurisdiction to grant such an order.
Jurisdiction and admissibility challenges
As like, in the usual constituted Arbitral Tribunal, in emergency arbitration also, the arbitrator has to check whether he or she has jurisdiction to preside over emergency proceedings. There was a case decided under ICC rules, wherein the emergency arbitrator deduced that in a multi-tier dispute resolution clause, that involved a 90-day negotiation period. It was a condition precedent for initiation or commencement of arbitration proceedings that is also ‘subject to limitation’ on the parties to give consent to arbitrate. The learned emergency arbitrator determined that in arbitration the emergency arbitration procedure was an inherent part and cannot be said to be separate or distinct. Thereafter, due to a failure in complying with the conditions precedent, the emergency arbitrator lost its jurisdiction to preside over in that case.
It is pursuant to Article 29(1) of the ICC Rules that determine if the interim relief sought by a party can be admitted into the Emergency Arbitrator Procedure as per the decision made by the emergency arbitrator.
Under Article 29(1), the emergency arbitrator considers:
- The urgency of the emergency interim measure sought; and
- That the party cannot hold for the constitution of the arbitral tribunal.
Emergency arbitrators consider these two questions as separate and distinct. Furthermore, they contemplate these questions as being an entrance enquiry subject to admissibility and to check the merits of the application submitted by the parties for urgent interim measures, so that the application made for such urgent interim measures could not wait to be made to the Arbitral Tribunal.
The need for emergency interim measures is growing day by day, and the enforceability of decisions made by the emergency arbitrators would remain a question to discuss for some time. Nevertheless, this dilemma arising out of enforceability of urgent emergency measures should not distract the need for such urgent measures provided in emergency arbitration. However, there are some complex issues that need to be worked upon while considering the interplay between emergency arbitral measures and construction and investment disputes. As in the current scenario, emergency arbitration is in great demand and widely accepted in most arbitration rules, but it is still considered in a ‘state of development’ and we cannot deny the fact that it may not always be the best option considering all types of arbitration proceedings.
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