PROVISIONAL MEASURES IN INTERNATIONAL COMMERCIAL ARBITRATION: THE EMERGENCE OF EMERGENCY ARBITRATION

Tia Majumdar[1]


ABSTRACT

At the outset, the paper discusses the merits of arbitration as a mode of dispute resolution after which it focuses on provisional measures in international commercial arbitration. The author also discusses the need for the procedure of emergency arbitration and the substantive requirements of the same. Additionally, the paper expounds on the state of interim arbitral relief in the Indian context.



The author has relied on purely doctrinal sources for the purpose of this paper. These sources include, but are not limited to research papers, articles, essays, books and other textual evidence.


Introduction


Arbitration as a mode of dispute resolution has gained immense currency over the last few decades. Admittedly, such dramatic growth was facilitated by developments in international trade and commerce. However, as far as the identification of reasons for such advancement is concerned, it would perhaps be prejudicial to withhold credit from the merits of international commercial arbitration as a mechanism for dispute resolution.


The most perceptible hallmark of arbitration is perhaps the degree of confidentiality[2] that is maintained, in addition to the entire process being less protracted than court proceedings.[3] International arbitration has often been referred to as “the oil, which lubricates the machinery of world trade”.[4] An efficient means of dispute resolution – international commercial arbitration facilitates the development of trans-national trade and commerce appreciably.[5] Parties often resort to this mode of dispute resolution for the neutrality it offers as regards disputes between multi-national parties – thereby enabling the parties to evade unfavourable provisions of the national laws of their co-contractors.[6]


However, procedural safeguards and due process result in inevitable delay in the process of arriving at the resolution of the concerned dispute.[7] Due to the considerable time lapse between the commencement of the arbitral proceedings and the constitution of Arbitral Tribunal, the subject matter of the arbitration may be prejudicially affected causing irreparable and non-compensable harm thereby rendering a final award frustrated.[8] There is thus a dire need for provisional measures in order to indemnify the concerned party against such irreparable harm. In the context of arbitration, provisional or interim measures are granted by arbitral tribunals or national courts.


It is into this area of research that the author seeks to delve in the course of this paper. The present paper is divided into two chief sections - the first section of which expounds on the field of emergency arbitration with a special focus on interim measures granted therein. The author, in the second section seeks to comment on provisional measures granted by tribunals in the context of India.


Provisional Measures in International Commercial Arbitration


The 2012 amendment to the new International Chamber of Commerce Rules of Arbitration (hereinafter “ICC Rules”) brought with it the possibility of parties obtaining interim conservatory relief in urgent matters that “cannot await the constitution of the tribunal”.[9] The procedure of obtaining an emergency arbitrator is a spin-off on the ICC Pre-Arbitral Referee[10], which was a standard clause found in the ICC Rules of 1990.[11]


The need for provisions relating to urgent relief is fast coming to the fore. The ICC is not alone in introducing such a procedure as the Stockholm Chamber of Commerce (SCC), the International Center for Dispute Resolution (ICDR) and the American Arbitration Association (AAA) have followed suit.[12]


In order to avoid the potentially time-consuming and unpredictable court proceedings, the parties may choose to seek recourse to the Emergency Arbitrator to secure interim reliefs before the constitution of an Arbitral Tribunal. However, the Emergency Arbitrator provisions are not intended to be the only means of seeking urgent relief and they are only an alternative to seeking relief from state courts.[13] Art. 29(7) of the Rules recognises the parties’ right to seek urgent interim or conservatory measures from a competent judicial authority at any time during the course of arbitral proceedings without infringing the arbitration agreement, thereby recognising the concurrent jurisdiction of both the Emergency Arbitrator and a competent judicial authority.[14]


An interesting aspect of this procedure is that the parties can opt out of the applicability of Emergency Arbitrator Provisions[15] and unless the parties so opt out, the provisions are applicable automatically.[16]


Substantive Requirements for Granting Interim Measures


The determination of the substantive conditions that need to be satisfied for the grant of emergency measures is usually left to the discretion of the Emergency Arbitrator.[17] These grounds are usually similar to those of provisional measures before an Arbitral Tribunal.[18]


The ICC Rules do not lay down any substantive pre-requisites for granting emergency measures except urgency and recourse to Emergency Arbitrator is available only for truly urgent matters.[19] Urgency is to be broadly interpreted and is deemed to be established when it is proven that a party’s potential losses increase with the mere passage of time.[20]


The pre-requisites laid down by the ICC Rules are often read in conjunction with those laid down in the UNCITRAL Model Law (hereinafter “Model Law”). The substantive requirements provided under Article 17A of the Model Law require that without the grant of the measures requested, the party requesting relief is likely to face irreparable harm substantially outweighing the likely harm to the opposing party if the measure is granted.[21] That is to say that the Emergency Arbitrator is obligated to ensure that the potential advantage to the requesting party with the granting of the requested measures does not outweigh the potential harm to the opposing party.[22] Irreperable harm in this context ought to be construed in an economic sense as opposed to a literal interpretation.[23]


An additional requirement lays down that there ought to be a reasonable possibility that the requesting party succeeds on the merits of the dispute under arbitration.[24]. However, it is only a prima facie examination on the merits that is in order, as it has been widely held that the arbitrator ought not to prejudge on the merits of the case.[25]


Emergency Arbitration under Indian Arbitration Law


The Arbitration and Conciliation Act, 1996 (hereinafter “The Act”) is primarily modeled after the UNCITRAL Model Law. Section 17 of the Act pertains to the grant of interim relief.[26] By virtue of this provision, unless there is an agreement indicating otherwise, the arbitral tribunal is empowered with the implied authority to direct any party to the dispute to undertake such conservatory measures as it deems fit in order to protect the subject matter of the dispute – the fundamental aim being to prevent frustration of the award so made.[27]


Emergency Arbitration as a procedure is still in its nascent stages as regards the Indian context as is evidenced in the fact that until extremely recently, there had been only one Indian decision pertaining to the usage and application of emergency arbitrators which was passed by the Bombay High Court in HSBC Pl. Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd wherein the Court acknowledged that an emergency arbitrator did indeed fall under the purview of Section 17.[28] This decision was further buttressed by the 246th Law Commission Report, which suggested amendments to the Act in order to bring emergency arbitrators under the ambit of Clause 2(1)(d).[29]


The recommendation by the Law Commission is a significant step forward for India in the scheme of international arbitration, as in the event that the suggestion is accepted and incorporated within the Act, India would be the sole country to have extended the scope of the definition of “Arbitral Tribunals” to include emergency arbitrators.[30]


Conclusion


The Indian scenario in relation to interim measures ordered by emergency arbitrators has thus far not been objectively favourable. This has been sought to be reformed by the amendments recommended by the 246th Law Commission Report, which while being a leap in the correct direction, has several flaws, which have to be corrected in order to become completely effective.


Emergency arbitration is an ingeniously useful pre-arbitral mechanism, which could be imported into the Indian arbitral regime with the inclusion of an emergency arbitrator within the definition of an arbitrator under Section 2(d) of the Act.


In the opinion of the author, emergency arbitrators ensure that the purpose of the final arbitral award is not frustrated and to this end, should be adopted as the preferred form of pre-arbitral interim measures, over Section 9 of the Act. The Law Commission’s recommendations, in the opinion of the author, should be adopted, after considering the changes proposed by various jurists, given that the Commission’s proposals make for a strong argument in favour of imbuing the arbitration climate in India with a welcoming flavour.




[1] Tia Majumdar is a graduate from National Law University, Delhi with a specific interest in commercial dispute resolution. She has assisted various Arbitral Tribunals in several high stake disputes under the guidance of Justice Deepak Verma (Retd.), Former Judge, Supreme Court of India.


[2] Hanotiau, International Arbitration in A Global Economy: The Challenges of the Future, 28 J. Int’l Arb. 89, 90 (2011); Knahr & Reinisch, Transparency Versus Confidentiality in International Investment Arbitration – The Biwater Gauff Compromise, 6 L. & Prac. Int’l Cts. & Tribs. 97, 109 (2007); La Spada, in T. Zuberbühler, C. Müller & P. Habegger (eds.), Swiss Rules of International Arbitration: Commentary Art. 43, ¶2 (2005); Neill, Confidentiality in Arbitration, 12 Arb. Int’l 287, 315-16 (1995); Trakman, Confidentiality in International Commercial Arbitration, 18 Arb. Int’l 1 (2002).


[3] Emmanuel Gaillard and John Savage (eds), Fouchard Gaillard Goldman on International Commercial Arbitration, Kluwer Law International (1999) at p. 1; David L. Threlkeld & Co. v. Metallgesellschaft Ltd, 923 F.2d 245, 248 (2d Cir. 1991).


[4] Veeder, The Lawyer’s Duty to Arbitrate in Good Faith, in L. Lévy & V. Veeder (eds.), Arbitration and Oral Evidence 115, 118 (2004); Paulsson, International Arbitration Is Not Arbitration, 2008:2 Stockholm Int’l Arb. Rev. 1.


[5] D. Caron & L. Caplan, The UNCITRAL Arbitration Rules: A Commentary 2 (2d ed. 2013)


[6] Emmanuel Gaillard and John Savage (eds), Fouchard Gaillard Goldman on International Commercial Arbitration, Kluwer Law International (1999) at p. 1.


[7] Gary B. Born , International Commercial Arbitration (Second Edition), 2nd edition, Kluwer Law International 2014 at p. 2425.


[8] Ibid at p. 2426; Baruch Baigel, The Emergency Arbitrator Procedure under the 2012 ICC Rules: A Juridical Analysis, Journal of International Arbitration, Kluwer Law International 2014, Volume 31 Issue 1) at p. 2.


[9] Article 29, ICC Rules of Arbitration 2012.


[10] Article 2, ICC Rules of Arbitration 1990.


[11] Baruch Baigel, The Emergency Arbitrator Procedure under the 2012 ICC Rules: A Juridical Analysis, Journal of International Arbitration, Kluwer Law International 2014, Volume 31 Issue 1) at p. 1.


[12] Ibid.


[13] Fry, Jason; Greenberg, Simon; Mazza, Francesca, Commentary on the 2012 Rules, The Secretariat's Guide to ICC Arbitration, 2012 at ¶3-1105.


[14] Gary B. Born , International Commercial Arbitration (Second Edition), 2nd edition, Kluwer Law International 2014 at p. 2457.


[15] Article 29(6), ICC Rules of Arbitration 2012; Webster, Thomas H; Bühler, Michael W,Handbook of ICC Arbitration, Sweet and Maxwell, 2008 ed. (2014) at ¶29-141.


[16] Fry, Jason; Greenberg, Simon; Mazza, Francesca, Commentary on the 2012 Rules, The Secretariat's Guide to ICC Arbitration, 2012 at ¶3-1055.


[17] Yesilirmak, Ali, Provisional Measures in International Commercial Arbitration, Kluwer Law International 2005 at ¶4-58.


[18] Ibid at ¶4-59.


[19] Bühler, Michael, ICC Pre-Arbitral Referee and Emergency Arbitrator Proceedings Compared, Special Supplement 2011: Interim, Conservatory and Emergency Measures in ICC Arbitration, at p. 95.


[20] ICC Interlocutory Award 10596 of 2000 (Unpublished), discussed in page 177 & 179 of Provisional Measures in International Commercial Arbitration by Ali Yesilirmak (refer to Note 17).


[21] Article 17A(1), UNCITRAL Model Law.


[22] Berger, Klaus Peter, International Economic Arbitration, Kluwer Law and Taxation Publishers (1993) at p. 336.


[23] Lew, Julian D. M.; Mistelis, Loukas A.; Kröll, Stefan Michael, Comparative International Commercial Arbitration, Kluwer Law International (2003) at ¶23-65.


[24] Ibid; Yesilirmak, Ali, Provisional Measures in International Commercial Arbitration, Kluwer Law International 2005 at ¶5-28.


[25] ICC Second Partial Award 8113 of 1995, Extracts published in 11(1) ICC International Court Arbitration Bull 65‐69 (2000).


[26] Arbitration and Conciliation Act, 1996.


[27] Justice R.S. Bachawat, Justice R.S. Bachawat’s Law of Arbitration and Conciliation, LexiNexis Butterworths Wadhwa Nagpur, 5th edn. (2010), at p. 1127.


[28] 2014 Indlaw MUM 29.


[29] 246th Report, Law Commission of India, at p. 37.


[30] Nikhil J. Variyar, Tribunal Ordered Interim Measures and Emergency Arbitrators: Recent Developments Across The World and in India, Indian Journal of Arbitration Law, Volume IV, Issue I (2015) at p. 39

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