Flexibility at the expense of certainty? Six years of the ICC Emergency Arbitrator Procedures

Published: 5/8/2019

This article considers some of the issues arising out of a recently published report regarding the ICC’s Emergency Arbitrator Procedures, and considers whether the Report does enough to allay concerns about the unpredictability of outcomes for parties considering using these procedures over seeking relief in national courts.

Background

The ICC Commission on Arbitration has recently published a report on Emergency Arbitrator (“EA”) Proceedings (the “Report”) which promises to “offer guidance to users, counsel and EAs to facilitate the use of EA proceedings through increased transparency and predictability.

The Report analyses the 80 cases in which ICC EA procedures have been used in the six years from their inception in 2012 through to 2018. It responds to a perceived nervousness among parties and their counsel regarding the use of EA proceedings as opposed to seeking urgent interim/conservatory measures in national courts. This unease itself is perceived to arise from the lack of available information which parties can use to gauge the likely outcome of EA proceedings. In the absence of an established body of judicial authority or other clear guidance to assist parties in understanding what relevant threshold tests should be applied by EAs (as would be available to parties seeking urgent interim relief in national courts, for example), it has hitherto in some cases been difficult for parties and their counsel to know how best to formulate an application, and to assess its likely prospects of success.  

However, as this article will go on to consider, the Report’s analysis of the outcomes of EA proceedings suggests that EAs themselves may have struggled with the lack of available precedent on which to base their decisions, with the result that there is little consistency in how these decisions have been arrived at (including, for example, as to fundamentals such as what laws have been applied, which has varied between the lex contractus, the lex arbitrii, general but unspecified “standards established in international arbitration,” and combinations of the three). The result is that there appears to be no real consensus on what thresholds an application is required to meet in order for a relief to be granted, such that the Report is perhaps unlikely immediately to remove the difficulty parties experience in deciding whether to seek relief in this forum.

Why use EA Procedures?

The ICC EA Procedures were introduced in 2012 by Article 29 of the Rules of Arbitration of the ICC (“ICC Rules”), with detailed procedures contained in Appendix V (together, the “EA Procedures”). The EA Procedures are designed to provide parties to a prospective ICC arbitration with a mechanism to seek urgent relief prior to the constitution of a tribunal to hear the substantive claim.

Whilst court systems supportive of arbitration, such as the courts of England and Wales, are generally well disposed to granting injunctive relief in these circumstances, there are a number of reasons why parties might prefer to seek relief from an EA, whether for confidentiality purposes, because interim relief is not available in national courts (whether because they have contracted out of their rights to approach national courts in the arbitration agreement or otherwise), or because they are seeking a flexible solution to an urgent issue which a national court might otherwise be unable or unwilling to order (for example, because it would be to interfere in the affairs of a foreign company).

The key findings of the ICC Report

One of the Report’s key findings is that ICC EA proceedings can be concluded very quickly indeed, with the ICC Secretariat deciding within 24 hours of an application being made whether it is permitted to proceed in all 80 cases (only two of which were rejected at this stage). In the 70 cases in which an order was made, 47% had the order rendered within the 15 days foreseen in the EA Procedures, 46% within 16 to 19 days, and the remaining 7% between 20 to 30 days (with the Report noting that the delay in the latter category was caused by the parties, rather than the EA).

Relief was granted only in the minority of applications (29%). Whilst the Report concludes that this may not be surprising, with the nature of interim relief meaning that it will be available in only exceptional cases, the success rate undoubtedly compares unfavourably with that of many national court systems, and is perhaps symptomatic of the difficulty EAs experience in granting relief in the absence of clear guidance as to how they should exercise their discretion, as is discussed in more detail below.

What types of relief have been applied for?

51 cases referred to in the Report sought an order preserving the status quo pending the constitution of the arbitral tribunal, in the majority of cases justified by the need to guarantee the availability of any final award. Orders sought included for the reinstatement of individuals in a company, the removal of individuals from board positions or appointments, the organisation of shareholder meetings, the passing of board resolutions, and participation in board meetings. In one case the application requested an order from the EA for a preliminary injunction to preserve the status quo by maintaining the distribution agreement in effect.

A further 23 cases sought an order for specific performance under the contract in dispute. 10 applications sought some form of declaratory relief; eight an interim payment; seven the transfer of money into an escrow account; and six an anti-suit injunction (for example preventing a party from bringing any legal actions in state courts until a dispute had been decided).

The availability of ex parte relief

The Report is somewhat equivocal as to the availability of ex parte relief in ICC EA proceedings. Whilst the Secretariat has acknowledged that it is “conceivable” that an EA might issue an initial order (such as a freezing order or order preserving the status quo) before the responding party has filed a response, in practice where orders have been requested on a true ex parte basis they have been rejected on the grounds that the ICC Rules do not permit relief to be granted without hearing the respondent or at least allowing it the opportunity to present its case.

The Report suggests a solution in permitting EAs to issue orders for a very temporary measure where a respondent is on notice of the application whilst expressly allowing the respondent to object to it within a very short timeframe. However, it does not expressly recognise that this type of arrangement would be unsuitable in the majority of cases where genuine urgent ex parte relief is required.  It seems that parties requiring relief which could be frustrated by their opponent being on notice of the intended action (such as, for example, by the immediate dissipation of or otherwise placing assets outside of a party’s reach as a result of that notice) would do better to apply to national courts as the current EA Procedures do not allow for true ex parte orders, even on an extremely temporary basis.  This is to a degree acknowledged in the Report which confirms that both practice and the review of the 80 EA cases proves that it is common for applicants to struggle with the question of how to ensure that the relief they seek is not frustrated before an EA can issue an order, in the face of the overarching requirement to respect the respondent’s right to be heard. It might be that in order to improve use of the ICC EA Procedures in such cases, the ICC should consider adopting provisions similar to those of the Swiss Rules of International Arbitration, which allow for ex parte relief in exceptional circumstances.

However, for parties seeking more unorthodox remedies, it is clear that the EA Procedures have the potential to present a useful alternative to court proceedings, with the Report finding that EAs have not always felt constrained by a technical analysis of whether measures sought are permitted by any applicable law (reflecting one of the acknowledged benefits of international arbitration in general). The Report suggests that “there is no clear visible trend on the norms applied in this respect.”

Flexibility at the expense of certainty?

The EA Procedures provide that an EA’s jurisdiction is confined to granting “urgent, interim or conservatory measures that cannot await the constitution of an arbitral tribunal” (Article 29(1) of the ICC Rules). Thus, the main criteria contemplated by the ICC Rules for an EA order to be granted would appear to be that the relief is “urgent” and “cannot await the constitution of a tribunal.” A guidance note issued for EAs, the ICC Emergency Arbitrator Order Checklist, further provides that in determining these criteria, an EA should consider the admissibility/jurisdiction of the EA application. Beyond this, no substantive guidance as to how the issues of urgency, admissibility and jurisdiction have been or should be applied is available to EAs. The result, as the Report expressly acknowledges, is that there has been a “far from uniform” application of these tests.

The Report contends that the non-prescriptive approach of ICC EA Procedures is in keeping with that of other institutional rules. However, this is not by any means always the case: the equivalent procedures under the Australian Centre for International Commercial Arbitration, for example, require for applications to be (i) necessary to avoid irreparable harm, which (ii) substantially outweighs any harm to the other party and (iii) to demonstrate a reasonable possibility that that applicant will succeed on the merits in the substantive arbitration.

The result for of the ICC’s approach appears to be a great deal of confusion among EAs as to what criteria an application need meet in order to be successful. Of the 80 applications heard, 40% considered the likelihood of success on the merits, 50% considered the likelihood of irreparable harm (with 50% of those case following a literal interpretation of “irreparable” and the other 50% instead considering that the harm should be “serious and substantial”). A further 15% of cases determined that it was necessary for there to be a risk of aggravation of the dispute were the relief not to be granted, and 20% considered a requirement for the application to entail no prejudgment of the merits of the substantive dispute. The balance of equities was a determinative factor in 20% of cases. In determining these issues, EAs variously made reference to general “international arbitration practice”, the lex arbitrii and international guidance such as the UNCITRAL Model Law of 2006.

From the above it can be inferred that in bringing an application under the ICC EA Procedures, a party cannot have any certainty as to how threshold criteria for granting interim measures will be applied: the factors that will be taken into account by an EA in making its decisions vary enormously from case to case, and it is difficult to detect a pattern in their reasoning from the Report.

Enforcement

Of the national laws surveyed by the Report, only Hong Kong, Singapore and New Zealand expressly provided for the enforceability of EA decisions. There is currently very limited case law as to whether national courts are empowered to enforce any decisions rendered by an EA, with some considering that EA decisions lack the finality required by the New York Convention. In particular, the decisions are afforded the status of Orders only, to be revisited by the Tribunal once constituted. Accordingly whilst the Report records the majority of cases, the EA proceedings “seem to work as a self-contained efficient and binding tool that already benefits from a high level of compliance by the parties,” the present situation on enforcement will render EA proceedings unsuitable for disputes which are particularly acrimonious or where there are reasons to doubt that a respondent will comply with an EA order voluntarily.

It should be noted that Annex II of the Report records the results of a survey of 45 national committees as to the enforceability of EA orders in their jurisdictions which provides a useful reference tool for practitioners.

What next for the EA Procedures?

In the circumstances, it is perhaps unsurprising that only a very small proportion (1.3%) of ICC cases filed since 2012 have included applications for relief from an EA.

The Report itself is very instructive for parties considering the use of EA Procedures, made with the intention of illustrating “past experience so as to let users know what to expect from the proceedings, how best to prepare for them and how to avoid pitfalls.” However, the experience of EA Procedures illustrated is unlikely to provide much encouragement to parties or their counsel to pursue EA proceedings in present circumstances, where such applications will enjoy low prospects of success, with significant uncertainty as to how they will ultimately be decided, and question marks over the enforceability of any order in the absence of party consent. The vagaries of how EAs approach the applications before them also places undue emphasis on the identity of the particular EA, which is wholly outside the control of the parties.

That said, with ICC cases typically concerning diverse topics involving disparate jurisdictions around the world, which trigger diverse challenges requiring diverging procedural solutions, there is certainly a genuine need for EA Procedures which can provide a flexible and viable alternative to the courts. In order to make EA Procedures more attractive to parties, it is likely that the ICC will need to take steps to provide EAs and arbitration practitioners with clear guidance as to how the threshold tests of urgency, admissibility and jurisdiction should be considered, perhaps by reference to certain “model” anonymised decisions of previous EAs where the jurisprudence is particularly helpful or illuminating. It would also no doubt make ICC EA proceedings more attractive if the ICC Rules were to make provision for genuine ex parte applications in limited circumstances, as well as perhaps providing for specific sanctions for parties who breach the terms of EA orders, whilst the international arbitration community should continue to work with national courts to provide for the recognition of the enforceability of such orders. 

In the meantime (and in light of the English Commercial Court’s decision in Gerald Metals SA v Timis [2016] EWHC 2327 (Ch), parties would be well advised to ensure that their rights to seek urgent interim relief in national courts are preserved under their arbitration agreements, as the courts may be reluctant to intervene in this context where there is time for an expedited tribunal to be formed or EA appointed and the tribunal or EA can exercise the necessary powers.

The ICC Report can be downloaded here.

An abridged version of this article was first published on the Kluwer Arbitration Blog on 2 August 2019, which can be viewed here.  

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