Jurisdiction - Singapore
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Singapore – The Emergence Of Emergency Arbitration.

2 July, 2014

 

Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

 

The Singapore International Arbitration Centre (SIAC) has recently published updated statistics regarding the use of its emergency arbitrator provisions. These show a record number of emergency arbitration applications received by the SIAC in the last year, in an increasingly broad range of sectors. Overall, the SIAC has handled 34 emergency arbitrations since this procedure was introduced in July 2010. It is a system that has been proven to work well, in itself; but there remain issues with emergency arbitration, particularly in the enforceability of emergency arbitration awards.

 

What Is Emergency Arbitration? 


An emergency arbitration is one in which an arbitrator is appointed to deal with requests for urgent interim relief, such as an interim injunction, before the main tribunal is constituted. Emergency arbitrator provisions have been introduced into most of the major arbitration rules as a means for parties to apply for interim relief without having to go to a national court, or having to wait until the main tribunal is appointed. 


Currently, the SIAC, the International Centre for Dispute Resolution, the International Chamber of Commerce, the Hong Kong International Arbitration Centre, the Stockholm Chamber of Commerce and the Swiss Chambers’ Arbitration Institution provide for emergency arbitration in their rules, among other institutions. The London Court of International Arbitration is expected to include similar provisions in the next revision of its rules, due later this year. 


This briefing focuses on emergency arbitration under the SIAC Rules, which has been one of the most regularly used and tested types of emergency arbitration. 


When Is It Available And What Are Its Features? 


Under the SIAC Rules, a party in need of emergency interim relief prior to the constitution of the main Tribunal can apply for such relief concurrent with or following the filing of a Notice of Arbitration. The applicant is required to notify the Registrar and all other parties of the nature of the relief sought, the reasons why such relief is required on an emergency basis, and why they are entitled to such relief. 


If the President of the SIAC Court of Arbitration decides that the SIAC should accept the application, the SIAC will appoint an emergency arbitrator within one business day of receiving the application. The emergency arbitrator then has two business days to establish a schedule for the application. 


From there, the emergency arbitrator will proceed to hear and decide the matter, whether on the basis of written submissions alone, or both written and oral submissions. Timelines can vary, but a typical emergency arbitration takes around eight to ten days from application to award. An emergency arbitrator can usually order any interim relief necessary, including interim injunctions and asset freezing orders. 


In our experience, the SIAC process works well: generally, a suitable arbitrator is appointed within the time limit; a procedural timetable is established promptly; and an appropriate award is issued within about a week thereafter. 


Issues With Emergency Arbitration 


Despite its increasing popularity, parties should be aware of the limitations of emergency arbitration, particularly when compared with the court-ordered interim measures which are available in support of arbitration in most countries. In particular:

 

  • Most arbitral institutions (including the SIAC) require applications for an emergency arbitrator to be made on notice to the other party.1 This might  defeat the purpose of seeking the interim measure.Where, for example, interim relief is sought to prevent the dissipation of assets, notification to a respondent of the application may encourage the respondent to transfer those assets out of reach. National courts usually permit applications to be made without notice, where there is a particular urgency or a need to obtain an order without the other party being made aware. The other party is then given an opportunity to apply to have the interim measure set aside. 

 

  • An emergency arbitrator cannot make orders against a third party, because the emergency arbitrator’s powers are limited to the parties to the arbitration. National courts, on the other hand, can impose an order on any third party which is within their jurisdiction; for example, a bank in which the respondent’s funds are being held.

 

  • An emergency arbitration award does not have the same “bite” as a court-ordered interim measure. While courts can impose criminal penalties for breaching an interim order, an emergency arbitrator has no such power.

 

  • There remain doubts as to the enforceability of rulings issued by an emergency arbitrator via the available court processes, especially whether or not these can be considered “final and binding”, and therefore enforceable under the New York Convention. Some jurisdictions, such as Singapore and Hong Kong, have specifically amended their legislation to make emergency arbitration awards enforceable, but most jurisdictions have not. There appears to be a high rate of voluntary compliance with emergency awards because respondents wish to avoid the possibility of the main tribunal drawing negative inferences about them.However, that provides little comfort for applicants when the other party refuses to comply. 

Practical Tips 


These issues limit the circumstances in which emergency arbitration can be used. Parties should therefore only consider applying for emergency arbitration where:

 

  • there is no possibility of applying to a national court for interim relief, or the only available national court for granting the relevant relief has a reputation for partiality or inefficiency; 
  • confidentiality is particularly important to the parties: confidentiality is maintained in an arbitration, but lost when the issues are canvassed in open court; and/or 
  • it appears likely that the opposing party will not frustrate the purpose of the interim relief (for example, by dissipating its assets upon receiving notice of the application) and is likely to comply voluntarily with any emergency arbitration award.

 

The latter point has meant that emergency arbitration has been used in particular for interim relief in the context of an ongoing contractual relationship: for example, applications for continuation of performance under supply contracts, or for release of interim payments under construction contracts.


Parties should also consider whether it would be better to wait for the main tribunal to be appointed, if the circumstances permit, rather than apply for emergency arbitration. This means the issues are presented to arbitrators who will ultimately decide the dispute, instead of to an emergency arbitrator who has no further involvement after issuing a ruling on the application for interim relief. The time taken to appoint the main tribunal can be reduced if a sole arbitrator is appointed, or if the relevant rules permit expedited formation of the tribunal.


End Notes 


1 The notable exception is under the Swiss Rules, which allow an emergency arbitrator to order emergency relief without notice to the other party. Upon an order being made, the other parties are required to be informed and immediately granted an opportunity to be heard on the matter (Art. 26 and 43 of the Swiss Rules). 


2 The SIAC notes in its 2013 Annual Review that “most cases handled by SIAC under [the emergency arbitrator] provisions have seen voluntary compliance of orders and awards issued by emergency arbitrators”. This is consistent with our experience.

 

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For further information, please contact:

 

Ben Giaretta, Partner, Ashurst
ben.giaretta@ashurst.com 


Michael Weatherley, Ashurst
michael.weatherley@ashurst.com

 

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