Default Application of Emergency Arbitrator Provisions in Commercial Arbitration Rules
The use of emergency arbitrator procedures is on the rise in both domestic and international commercial arbitration proceedings. These procedures, which now have been adopted by nearly every major arbitral institution, provide a mechanism for parties to obtain interim relief before the appointment of an arbitration tribunal. Where the rules for such proceedings are applicable and are invoked by either party, the arbitral institution will appoint an emergency arbitrator whose interim order will be binding on the parties—even where the parties have not specifically consented to these procedures. It therefore is important to understand how such procedures are triggered or avoided, so that you are not locked into a process that might not serve your interests or strategy.
This Advisory summarizes the key features of emergency arbitrator proceedings and provides a guide to determining whether disputes relating to your contracts may be subject to such proceedings.
Could You Be Required to Participate in Emergency Arbitrator Proceedings?
If your arbitration agreement was concluded after the emergency arbitrator rules of your chosen arbitral institution came into effect, you can be required to participate in emergency arbitrator proceedings unless you and your counter-party have agreed to opt-out of the emergency arbitrator rules. The situation is not so clear, however, where your arbitration agreement was concluded before the emergency arbitrator rules came into effect.
Arbitral institutions have adopted two different approaches to determining whether emergency arbitrator rules apply to arbitration agreements concluded before the emergency arbitrator rules came into effect. Many of the most commonly used arbitral providers, including for example the International Chamber of Commerce (ICC), the American Arbitration Association (AAA), and the Hong Kong International Arbitration Centre (HKIAC), have focused on the date the parties concluded their arbitration agreement. Under this approach, all arbitration agreements concluded after the emergency arbitrator provisions came into effect are subject to the emergency arbitrator procedure (unless the parties expressly opt-out), and all arbitration agreements concluded before the emergency arbitrator provisions came into effect are excluded (unless the parties expressly opt-in).
Other institutions, including for example the Singapore International Arbitration Centre (SIAC) and JAMS, have adopted an approach focused on the date the arbitration commences, rather than the date the agreement to arbitrate was concluded. Under this approach, unless the parties have expressly opted out, all arbitrations commenced after the emergency arbitrator rules became effective are subject to those rules, regardless of when the arbitration agreement was concluded. Consequently, even if you concluded your arbitration agreement before these institutions added their emergency arbitrator provisions, you may be required to participate in an emergency arbitrator proceeding.
To determine whether your arbitration agreement is subject to binding emergency arbitrator procedures, you must know (1) which of these two regimes governs, and (2) when the applicable emergency arbitrator rules came into effect. Included with this Advisory is a chart that provides a simple roadmap to answering those questions for each of the major arbitration provider institutions.
How Does an Emergency Arbitrator Proceeding Work?
Before the introduction of emergency arbitrator procedures, a party seeking immediate relief prior to constitution of the arbitration tribunal had to go to court and seek a temporary restraining order and/or preliminary injunction. Emergency arbitrator provisions provide a mechanism for a party in that situation to obtain urgent, provisional relief through arbitration.
Emergency arbitrator proceedings offer a private, neutral forum for obtaining such emergency relief. Most arbitral institutions with emergency arbitrator rules stand ready to appoint an emergency arbitrator within one to two business days of receipt of a request. Once appointed, the emergency arbitrator will review the parties' submissions and hear argument on a condensed schedule before rendering a decision within the time period required by the rules (typically two to three weeks from the date of the request). The emergency arbitrator has considerable discretion in deciding whether to order the requested relief. Although no uniform standard exists, emergency arbitrators typically require a showing by the requesting party that the relief it seeks is necessary to avoid imminent and serious harm or required to preserve the integrity of the proceedings.
The decision of an emergency arbitrator is binding on the parties, but is subject to subsequent review, modification, or termination by the arbitral tribunal. As is true for arbitration awards and orders generally, emergency arbitrator orders are not subject to judicial appeal for errors of law or fact.
Will the Courts Enforce an Order of an Emergency Arbitrator?
In practice, parties often comply voluntarily with emergency arbitrator orders to avoid appearing uncooperative or noncompliant to the tribunal that ultimately will decide the dispute, rendering judicial enforcement of such orders unnecessary. However, where a party refuses to comply with an emergency arbitrator's order, recourse to the courts may be necessary. The jurisprudence on the enforceability of emergency arbitrator orders is unsettled and varies by jurisdiction.
In the United States, the Southern District of New York recently confirmed an award issued by an emergency arbitrator under the AAA Optional Rules for Emergency Measures of Protection. The court determined that the equitable relief granted by the emergency arbitrator was final and based upon a finding of irreparable harm, and that the emergency arbitrator did not manifestly disregard the law or exceed his authority. In confirming the award, the court noted that it was "mindful of the time-sensitive nature" of compliance with the emergency order. See Yahoo! Inc. v. Microsoft Corp., 983 F. Supp. 2d 310, 319 (S.D.N.Y. 2013).
Some other courts, by contrast, have refused to enforce emergency arbitrator orders on the ground that only a final award can be judicially enforced and emergency arbitrator orders are not final where (as is typically the case) the arbitration rules permit the main arbitral tribunal to review and vacate the emergency arbitrator's order. See, e.g., Chinmax Medical Sys. Inc. v. Alere San Diego, Inc., 2011 WL 2135350 No. 10-CV-2467-WQH(NLS) (S.D. Cal. May 27, 2011) (unpublished).
Outside of the United States, certain jurisdictions have resolved the issue by passing specialized legislation to ensure the enforceability of emergency arbitrator orders. For example, Hong Kong has amended its arbitration ordinance to allow enforcement of emergency arbitrator orders in the same manner as an order or direction of the Hong Kong courts. Singapore has rendered emergency arbitrator orders enforceable by expanding the definition of "arbitral tribunal" in its arbitration legislation to include "an emergency arbitrator appointment." As use of emergency arbitrator procedures grows, other jurisdictions may follow suit.
Emergency arbitrator provisions provide an arbitration mechanism for obtaining urgent interim relief before the arbitration tribunal is constituted. This mechanism may be especially attractive to parties seeking a private resolution to a sensitive or confidential dispute. Although the use of these provisions is not yet widespread (only 29 percent of respondents in Queen Mary University's recent study of arbitration users stated that they would prefer to use an emergency arbitrator procedure rather than seeking interim relief from domestic courts ) it is important to be familiar with this procedure and its applicability to your arbitration agreements—including in particular older agreements concluded before emergency arbitrator procedures came on the scene.
This chart provides a useful at-a-glance guide to determining whether emergency arbitrator procedures apply to disputes under your contract. For parties wishing to expressly opt out of such procedures, it is advisable to agree to do so before a dispute arises.