Emergency arbitration is a relatively new option in the pantheon of alternative dispute resolution. While many jurisdictions allow for interim or preliminary relief to be awarded by an arbitral tribunal, it may take weeks or months for such a tribunal to be fully convened and even then enforceability of such relief remains dubious in some international jurisdictions. Until relatively recently, the only option for immediate emergency relief was to seek a preliminary injunction in a court. However, such relief may run counter to the entire spirit of arbitration desired by the parties.
This is where emergency arbitration provisions step in, allowing a chance for immediate relief granted by an appointed arbitrator. With the adoption of an emergency arbitrator provision by the London Court of International Arbitration (LCIA) on October 1, 2014, the three most widely utilized arbitration institutions (ICC, AAA and ICDR) all provide for emergency arbitration in their default rules. Further confirming this trend, two of the fastest growing arbitration institutions (SIAC and HKIAC) include such emergency arbitration provisions as well.
This article will: 1) explore generally the powers of an arbitrator (or arbitrators) to issue preliminary or interim relief; 2) discuss whether you should opt-out of or utilize emergency arbitration; and 3) discuss the mechanics of opting-out from the default emergency arbitration provisions (should you wish to
Power Of Arbitrators To Grant Interim Or Preliminary Relief Generally
If a speedy assembly of an arbitral tribunal is possible, then parties may simply seek interim relief from the panel so assembled. This power has been expressly granted by statute in 17 states and the District of Columbia (and introduced as legislation in 3 more), all of which have adopted the 2000 revision of the Uniform Arbitration Act. In addition, courts widely enforce arbitral interim relief throughout the United States. Some courts have even upheld “interim” awards as “final” with regard to the issue of the status of the parties during the pendency of arbitration.
In fact, under the 2000 Uniform Arbitration Act, once the arbitral tribunal has been appointed, parties may seek provisional relief in the courts “only if the matter is urgent and the arbitrator is not able to act timely or the arbitrator cannot provide an adequate remedy.” While interim relief issued by an arbitrator is generally enforced in the United States, different countries may not necessarily follow suit. An arbitral award of any kind without court enforcement is essentially useless, so verifying enforcement in your particular jurisdiction is critical.
Should You Opt-Out Of Emergency Arbitration Provisions?
Prior to October 2013, the only way to have the option of emergency arbitration under the AAA rules was to opt-in to those optional provisions. Now, all of the major arbitration institutions have included those provisions in their default rules. As a result, the analysis of risk in opting-in to an emergency arbitration agreement has now shifted to the risk of failing to opt-out.
The risk of failing to opt-out of an emergency arbitration provision is similar to the general risk of arbitration. That is, a lone arbitrator may be empowered to issue a ruling that is not reviewable on the merits. It may be that the effect of that “interim” ruling is in effect a final ruling on the merits. A recent decision from the Southern District of New York addressed a similar issue. Yahoo!, Inc. v. Microsoft Corp., 983 F. Supp. 2d 310 (S.D.N.Y. 2013).
In Yahoo!, the parties affirmatively opted-in to the optional rules for emergency relief, since they signed their contract before the AAA had integrated the provisions into its standard rules. When Yahoo! stated that it would be pausing performance on the contract for several months, Microsoft sought and received an emergency award enjoining Yahoo! from withholding its performance. Yahoo! objected to the award on the grounds that it amounted to a final award rather than an interim order, but the court reasoned that the rules allowed for “interim, injunctive, or emergency relief.” In the end, Microsoft got everything it wanted from the emergency arbitration without a further need for the parties to continue with a full arbitration proceeding under the AAA rules.
The benefits of the emergency arbitration were apparent, at least from Microsoft’s position: in less than one month—26 days to be precise—an arbitrator was appointed, conducted a hearing, issued an order, and a court confirmed the order.
The risk for the parties agreeing to retain emergency arbitration is less apparent from Yahoo!’s perspective. In this case, Microsoft may have sought a preliminary injunction in court, which may have proven to be more expensive, complicated, and time consuming. While a delay would have benefited Yahoo! in the short-term, a decision issued by a judge would have been just as final given that an interlocutory appeal is unlikely to succeed. Further, at least in the United States, there are no published orders denying an emergency award/order. For domestic disputes, the pros and cons of emergency arbitration will obviously vary upon the particular circumstances and, as noted above, can differ sharply between the parties.
The real advantage of emergency arbitration lies in its potential to avoid a situation where you need emergency relief and the only court capable of granting it is in a foreign country where you are either unfamiliar with the procedures or customs of seeking such relief or where the courts are notoriously corrupt or inefficient. Also unclear is the international status of emergency awards and whether foreign countries would be required to view interim measures as enforceable under the New York Convention on the Recognition and Enforcement of Arbitral Awards (some jurisdictions draw distinctions between arbitral orders and awards under this Convention).
Ultimately you will need to ask yourself three questions before choosing emergency arbitration:
• In which court do I ultimately need to enforce my emergency relief and is the jurisdiction favorable to emergency arbitration (e.g., Florida, Hong Kong, or Singapore)?
• How quickly do I need this relief – can it wait for a national court to make a decision or for my arbitral tribunal to convene and issue an order?
• Are the costs of appointing and paying for an emergency arbitrator prohibitive?
The Mechanics Of Opting-Out Of Emergency Arbitration (A Minor Wrinkle)
As previously mentioned, the ICC, AAA/ICDR, and LCIA rules provide for emergency arbitration as their default, but expressly allow for parties to opt-out of this expedited proceeding through their arbitration agreement. If, after reading this article and advising your client or consulting with counsel, you decide that you want the court system to be the exclusive realm for emergency relief, then you should expressly opt-out of the emergency arbitration rules in your agreement.
There is, however, one wrinkle to be aware of if you desire the ICC rules to govern your dispute and you do not want to opt-out of the emergency arbitrator provisions. Under the ICC Rules, emergency arbitration will be denied if “the parties have agreed to another pre-arbitral procedure that provides for the granting of conservatory, interim or similar measures.” There is no case law addressing this potential “inadvertent opt-out” – a fact that is hardly surprising inasmuch as the emergency arbitration option has only been available since 2012 and, according to the ICC, there have only been eight requests for emergency measures during that timeframe. The important take-away at this juncture is that by expressly providing a provision for some alternative interim relief in the event of a dispute, you may have inadvertently opted-out from the opportunity to pursue emergency relief. Accordingly, it is essential to be as clear as possible when drafting your arbitration agreement, regardless of the governing rules.