Emergency Arbitrations – what they are and when to use them
Introduction
Parties to a dispute can and do find themselves in positions where swift action needs to be taken to preserve their rights or seek interim measures. In cases where a particular contract provides for arbitration, this may pose a problem given the time involved in commencing arbitration proceedings. In order to address this issue, certain arbitral institutions have created “emergency arbitration” procedures in their respective rules to offer emergency interim relief.
This guide explains how parties might use such procedures to seek, for example, an injunction against a performance bond demand. We compare and contrast relevant procedures in the following institutions: International Chamber of Commerce (ICC), Saudi Center for Commercial Arbitration (SCCA) and the Dubai International Arbitration Centre (DIAC).
The Scenario
A construction company (Claimant) enters into three contracts with a developer (Respondent) to build commercial complexes in Qatar, Saudi Arabia, and Dubai. The contracts include conditional performance bonds issued by a bank (which is, admittedly, rare in this part of the world). The Respondent demands from the bank payment under each of the bonds on the grounds of late performance. The conditions of the bond permit the Claimant to argue that no breach of the construction contract has occurred and that any demand should therefore be rejected.
The three contracts are all governed by English law but contain different arbitration clauses:
i. The Qatar contract has an ICC arbitration clause, with the seat in Doha.
ii. The Saudi Arabia contract has an SCCA arbitration clause, with the seat in Jeddah.
iii. The Dubai contract has a DIAC arbitration clause, with the seat in DIFC.
International Chamber of Commerce (ICC): Qatar
Applicable Law
Article 29 of the ICC Arbitration Rules allows emergency arbitrators to order interim measures. Specifically, Article 29(1) of the ICC Arbitration Rules grants the emergency arbitrator the authority to issue measures necessary to preserve the status quo or prevent harm pending the tribunal’s final decision. Qatar's Law No. 2 of 2017 (Arbitration Law) supports the use of emergency arbitrators by recognising the enforceability of such interim measures. Article 17 empowers arbitrators to grant interim measures that are enforceable in the State of Qatar.
Application
(i) Process: The Claimant submits a Request for Emergency Measures to the ICC Secretariat.
(ii) Documentation: The application includes evidence showing the urgency and merits of the injunction request.
(iii) Timeline: The ICC Court appoints an emergency arbitrator within 2 days.
Decision Making
(i) Procedure: The emergency arbitrator reviews written submissions and may hold a hearing if necessary.
(ii) Timeline: A decision is issued within 15 days of receiving the case file.
(iii) Order: The emergency arbitrator can issue an interim order preventing the bond call until a full tribunal is constituted.
(iv) Example Outcome: The ICC emergency arbitrator issues an interim order preventing the Respondent from encashing the performance bond demand until the tribunal reviews the case, based on evidence of potential irreparable harm and the likelihood of success on the merits. Courts of Qatar generally enforce emergency interim orders made by arbitrators.
Saudi Center for Commercial Arbitration (SCCA): Saudi Arabia
Applicable Law:
Appendix III of the SCCA Arbitration Rules provides for the appointment of an emergency arbitrator and empowers them under Appendix III Article 7 to issue interim measures necessary to preserve the rights of the parties or to maintain the status quo until the tribunal is constituted. The Arbitration Regulation issued under Royal Decree No. M/34 dated 24/5/1433H (16 April 2012) and The Executive Regulations published in the Saudi Gazette and effective from 9 June 2017, support the use of emergency arbitrators by allowing for the recognition and enforcement of interim measures, with Article 23 specifically empowering arbitrators to grant such measures.
Application
(i) Process: The Claimant files a request for emergency relief with the SCCA, including relevant evidence and arguments.
(ii) Documentation: The application should demonstrate the necessity and urgency of the injunction.
(iii) Timeline: The SCCA appoints an emergency arbitrator within 1-2 business days.
Decision Making
(i) Procedure: The emergency arbitrator assesses the submissions and can conduct expedited hearings.
(ii) Timeline: A decision is expected within 10 days after the emergency arbitrator receives the case file.
(iii) Order: The arbitrator can issue an interim measure to restrain the bond call until the main tribunal is in place.
(iv) Example Outcome: The SCCA emergency arbitrator issues an interim order directing the Respondent not to call on the performance bond and, if it has already done so, to request the Bank not process its demand.
DIAC under Dubai International Financial Centre (DIFC) Law
Applicable Law
Article 32 of the DIFC Arbitration Law, enacted by DIFC Law No. 1 of 2008, supports the use of emergency arbitrators by granting them the authority to order interim measures, including preventing the call on performance bonds, pending the full arbitration process.
Application
(i) Process: The Claimant submits an emergency application to the DIAC, detailing the need for urgent relief. This application may be without notice, where the law of the seat of arbitration permits this (Appendix II Section 2.2 of the DIAC Rules);
(ii) Documentation: The submission must include comprehensive evidence supporting the injunction request;
(iii) Timeline: DIAC appoints an emergency arbitrator within 3 days.
Decision Making
(i) Procedure: The emergency arbitrator evaluates the evidence and can hold swift hearings if required.
(ii) Timeline: A decision is typically issued within 14 days of receiving the file.
(iii) Order: The arbitrator can grant interim measures to prevent the bond call pending the regular arbitration.
(iv) Example Outcome: The DIAC emergency arbitrator grants an interim measure suspending the performance bond demand, mandating that the bank to not release funds until the main arbitration is concluded. The Claimant enforces this measure through the DIFC Courts.
Carve Out scenario
Arbitration is the forum of dispute but there is a carve out for urgent relief applications to be filed before the Courts of Qatar.
Applicable Law
Qatar's Law No. 2 of 2017 Article 9 permits the Courts of Qatar (including the Qatar International Court, in some circumstances) to provide an interim or precautionary measure.
Application
(i) Process: The Claimant appoints a local advocate who prepares a written brief to the Court.
(ii) Documentation: An original of the arbitration agreement, bond call and other supporting documentation will need to be provided, alongside certified copies of the same in Arabic.
(iii) Timeline: Using the Trade and Investment Court procedure, applications for interim relief usually take around 2 weeks to a month to be processed.
Decision Making
(i) Procedure: Should the Court decide, it may provide the Respondent with an opportunity to respond to the application, in normal circumstances this would be 30 days, though the Court may shorten this to around 10 days to accommodate the urgency of the request.
(ii) Timeline: The Court would usually provide its decision within 2 – 4 weeks.
(iii) Order: The Court may order for an injunction to be granted, preventing any bond from being encashed.
(iv) Example Outcome: The Court orders that the performance bond not be encashed until the until the arbitral award has been issued and provided to the Enforcement Court for recognition and execution. The eventual arbitral award is in the Claimant’s favour and thus the Execution Court processes the return of the original bond to the Claimant, so that it may not be encashed.
The above shows that seeking interim relief from an emergency arbitrator is possible under different rules and in different seats. Although a relatively recent development, the use of emergency arbitrators is increasing. For example: the 2023 LCIA Annual Casework Report highlights a significant increase in the use of emergency arbitrations. Referrals rose from 333 to 377, with approximately one-third of claims exceeding USD 20 million. This trend underscores the growing reliance on emergency arbitrations for swift interim measures in high-value international disputes.
When applying for emergency arbitration, several critical factors should be considered to maximise the prospects of success. First, the urgency of the request must be convincingly demonstrated and based on clear evidence that immediate relief is necessary to prevent irreparable harm and maintain the status quo until the final arbitral award. The applicant should also understand the specific rules and procedures of the chosen arbitral institution, as these can differ significantly, particularly regarding whether the institution issues an 'order' or 'award' and the enforceability of these decisions. Additionally, the cost implications of pursuing emergency arbitration should be carefully evaluated as they can be substantial. It is also essential to ensure that any interim order granted will be recognised and enforceable in all relevant jurisdictions, which often requires a detailed understanding of local laws and international arbitration agreements.
Key Takeaways
- Review the Institutional Rules: when entering into an agreement choose the institution that best aligns with your needs for speed, cost, and enforceability, including the potential use of emergency arbitrators.
- Prepare Thorough Documentation: Compile comprehensive evidence showing the urgency and necessity of the injunction.
- Consider Enforceability: Ensure that the interim order will be recognised and enforceable in all relevant jurisdictions.
In conclusion, emergency arbitrations have become a crucial tool in the arbitration landscape, providing swift and effective interim measures to parties facing urgent disputes. The procedures outlined by various arbitral institutions, such as the ICC, SCCA, and DIAC, highlight the importance of understanding the specific rules and timelines applicable to each institution. By preparing thorough documentation and demonstrating the urgency and necessity of the requested measures, parties can effectively utilise emergency arbitrations to protect their interests. As the use of emergency arbitrations continues to grow, they will remain an essential mechanism for addressing immediate legal needs in complex international disputes.