emergency arbitrator:overseas experience and russian arbitration law

Emergency Arbitrator:Overseas Experience andRussian Arbitration Law

21 May 2015Moscow

Jane FedotovaSolicitor, Simmons & Simmons LLP

[email protected]

https://uk.linkedin.com/in/janefedotova

mailto:[email protected]

mailto:[email protected]

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© Simmons & Simmons 2009

Why was the concept of emergency procedures introduced and what are its origins?

The Republic of Congo Case

How do the rules of international arbitration institutions compare?

What standards should be met to succeed in an application for emergency relief?

Is an emergency decision enforceable?

How does the concept of emergency procedures interrelate within the current Russian Arbitration Law?

Should you apply for emergency relief and what are the consequences of failure to comply with emergency decision?

Introduction

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Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures – Article 17 of UNCITRAL Model Law 2006

Such measures are not available until formation of the arbitral tribunal

Although the claimant may at any time apply for interim measures to the court, it might be reluctant to do so for the following reasons:

– publicity

– reputational risks which may lead to loss of profits, it will take years to rebuild the lost reputation

– absence of highly skilled and specialised judges

– inflexible and bureaucratic court procedures

– interference of the courts in private dispute resolution

Solution: introduction of emergency procedures which allow in urgent circumstances to apply for an emergency relief before formation of the tribunal

Reasons for Introduction of Emergency Procedures

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For the first time emergency procedures were introduced in the ICC Pre-Arbitral Referee Procedure 1990 (the “Rules”)

However, the Rules were not popular for the following reasons:

– they required parties to sign a separate agreement (opt-in), and

– there was uncertainty with regards to enforceability of decisions of a referee

The Republic of Congo 2003 case was the first case to consider the nature of the pre-arbitral procedures

The Republic of Congo applied to set aside the order of the referee under Article 1504 of the French New Code of Civil Procedure for setting aside the arbitral awards

The other side opposed the application on the basis that (a) the Rules did not provide for arbitration and (b) the order was not a binding and final award


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The Court of Appeal of Paris noted that:

– the preamble of the Rules referred to the referee as a third party

– the Rules did not refer to the referee as an arbitrator

– there was no reference in the Procedure to arbitration

– the referee ordered not to obstruct the performance of the contract

– referred the underlying dispute to the arbitral tribunal

The Court held that:

– the referee was not an arbitrator

– the binding nature of the order derived from the agreement

– the order had no more binding effect than a contractual provision as opposed to the binding effect of a decision having res judicata

The ruling was criticised because of its formalistic approach and since then there were attempts to rectify the position


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How Do the Rules about Emergency Procedures Compare?

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The LCIA Rules provide for both expedited formation of a tribunal and emergency procedures. The emergency arbitrator may grant both orders and awards

The ICC Rules allow the emergency arbitrator to grant only orders

In SIAC and HKIAC arbitrations seated in Singapore and Hong Kong respectively decisions of emergency arbitrators are enforceable under local arbitration law

Swiss Rules allow an emergency application to be submitted without notice to the other side

ICDR Rules do not require payment of a special fee for emergency procedures

SCC Rules state that an emergency decision shall be made not later than 5 days from the date of transfer of the file to the emergency arbitrator, and such time limit may be extended by the Board, if necessary

How Do the Rules Compare?

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The application must comply with the formal requirements, such as:

– name and contact details of the parties and their representatives

– confirmation of the payment of a special fee

– comments on the language, seat of arbitration and applicable law

– enclose arbitration agreement and other relevant documents

– enclose a Request for Arbitration (LCIA, SIAC, HKIAC) or a confirmation that the claim will be issued shortly (ICC, SCC, Swiss Rules), and other

The applicant must also demonstrate that:

– it has a prima facie case

– it may suffer “irreparable harm” unless the emergency relief is granted

– the circumstances are of an urgent nature which cannot await the constitution of an arbitral tribunal / final decision

– the emergency relief does not prejudge the merits of the case

What Makes a Successful Application?

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The SCC Practice Paper about Emergency Arbitrator Decisions made in 1 January 2010 – 31 December 2013 (by Johan Lundstedt)

Practical Examples

What Makes a Successful Application?

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Enforcement of an emergency decision involves:

– consideration of particular arbitration rules

– interrelation of the arbitration rules with the provisions of the New York Convention 1958

– relevant local arbitration legislation

Article 2a of the Singapore International Arbitration Act definition of “arbitral tribunal” includes an emergency arbitrator and his decisions are enforced as any other decisions of the arbitral tribunal

Part 3A of the Hong Kong Arbitration Ordinance allows the recognition and enforcement of “any emergency relief granted, whether in or outside Hong Kong, by an emergency arbitrator under the relevant arbitration rules”

a Singapore-seated emergency arbitrator order would enjoy recognition and enforcement in Hong Kong, but not vice versa

Is an Emergency Decision Enforceable?

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In Chinmax Medical Systems Inc. v Alere San Diego Inc. the US court held that the court will not interfere where the decision of an emergency arbitrator may be reviewed by the arbitral tribunal under Article 37 of the ICDR Rules

But the court decision in the Yahoo ! Inc. v Microsoft Corp. case confirms that it is possible to enforce a decision of an emergency arbitrator in the US

In this case the emergency decision was granted under the AAA Optional Rules of Emergency Measures of Protection 1999, which provide limited options for review of an emergency decision

The Agreement, in the same provision that adopted the Emergency Measures, stated “the parties agree that the arbitrator is authorised to compel and award interim injunctive or emergency relief … and the arbitrator may compel and award specific performance (in addition to any other remedies and including in connection with claims for interim, injunctive or emergency relief)”.

Is an Emergency Decision Enforceable?

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Russian law distinguishes between domestic and international arbitration

There is no reference to any pre-arbitral procedures in either current domestic or international arbitration law

However, the Arbitration Bill relating to domestic arbitration provides that the arbitration institution may grant interim measures before formation of the tribunal

Article 9 of the Law on International Commercial Arbitration 1993 permits applications to the court for interim measures before or after the constitution of the tribunal

According to Russian legal doctrine interim measures obtained in arbitration may be either voluntary (ordered by the Tribunal) or compulsory (ordered by the court)

Emergency Procedures and Russian Arbitration Law

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It is unlikely that Russian courts will enforce emergency decisions for the following reasons:

– according to paragraph 33 of the Ruling No. 55 of the Plenum of the former Supreme Commercial Court “On application of the interim measures”

foreign court decisions granting interim measures are not regarded as final in a sense that they do not determine the merits of the case

– according to paragraph 26 of the Information Letter No. 78 of Presidium of the former Supreme Commercial Court, dated 07 July 2004

“other” court decisions granted before or after the determination of the merits of the dispute are not enforceable because they are not final and

are made without review of all evidence in the case

Emergency Procedures and Russian Arbitration Law

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You should apply, unless interim measures are sought against third parties

If there is a risk of non-enforceability, apply simultaneously for an emergency decision and to the court

If you apply to the court in parallel, immediately notify the emergency arbitrator, secretariat and the other side

If a party fails to comply with an emergency decision the Tribunal may draw negative inferences

Failure to comply with an emergency decision may be taken into account by the Tribunal in determining costs

Should You Apply and What Are the Consequences of Failure to Comply with the Emergency Decision?

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Jane Fedotova, MCIArb, LL.M.

[email protected]

Jane is a solicitor at Simmons & Simmons and a Russian qualified lawyer. She works closely with the CIS practice group and focuses on commercial litigation and international arbitration. Jane has completed a secondment at the LCIA where she was responsible for administration of the CIS cases. Jane graduated from the Lomonosov Moscow State University and obtained an LL.M. degree from the University College London. She is a Member of the Chartered Institute of Arbitrators. Jane regularly writes articles and participates in conferences relating to arbitration. Jane speaks Russian, English, Lithuanian, German and Polish.

Any Questions?

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