© 2016 Sherby & Co., Advs.
Commentators on international arbitration have taken great interest in the recent decision of Gerald Metals SA v. The Trustees of the Timis Trust & others [2016] EWHC 2327, in which the English High Court held that it may provide interim relief to a party to an international agreement only in a case in which neither an emergency arbitrator nor an arbitral tribunal (formed expeditiously) could provide such relief. See, e.g., “English High Court Indicates New LCIA Rules Limit Court’s Power To Grant Interim Relief” (arbitration blog of Hogan Lovells, http://www.hlarbitrationlaw.com/2016/10/english-high-court-indicates-new-lcia-rules-limit-courts-power-to-grant-interim-relief/); “New LCIA Rules limit High Court’s powers to grant interim relief,” (web site of Brick Court Chambers, http://www.brickcourt.co.uk/news/pdf/new-lcia-rules-limit-high-courts-powers-to-grant-interim-relief).
Yet the analysis so far appears to have overlooked a key issue raised by the High Court decision – namely, the extent to which an emergency arbitrator, when denying an application for injunctive relief, should draft his/her decision with a view toward review by a court that might be asked to issue injunctive relief.
In Gerald Metals, the claimant had applied to the London Court of International Arbitration both for the appointment of an emergency arbitrator and for the expedited formation of the arbitral tribunal – on the grounds that the claimant needed an urgent, interim freezing order against the disposition of assets by a trustee. As is the case with virtually every arbitral institution that has adopted rules for the appointment of emergency arbitrators, the LCIA’s rules state expressly that they “shall not prejudice any party’s right to apply to a state court . . . for any interim or conservatory measures.”
The LCIA court rejected both of Gerald Metals’s applications (an emergency arbitrator was not even appointed), whereupon the claimant applied to the High Court for the same relief.
After reviewing the standards for issuing interim injunctive relief both under the rules of the LCIA and under UK law, the High Court concluded that those standards are essentially the same. The Court went on to explain why rejection of the application by the LCIA essentially mandated rejection by the Court:
[W]hen assessing the urgency of the matter the LCIA must have had in mind the fact that in response to the application made by [claimant] Gerald Metals the trustees had given undertakings not to dispose of assets other than for full value and on arm’s length terms with all such value to be retained by the [trustee], and to provide written notice to Gerald Metals at least seven days prior to executing any material transaction or disposal of any asset which the trustees consider have a value of £250,000 or more. In the circumstances the only inference that can . . . be drawn from the refusal of Gerald Metal’s application is that the LCIA was not persuaded that the application was so urgent that it needed to be decided before the arbitral tribunal is constituted in the ordinary way . . . .
The High Court probably was correct that the refusal/denial of the claimant’s application indicates that the LCIA was not persuaded that the application was “so urgent” that it needed to be decided before the arbitral tribunal is constituted. Similarly the High Court probably was correct in concluding that the standards for granting interim injunctive relief are essentially the same under the Arbitration Act 1996 and the LCIA Rules.
Nonetheless, the above-quoted portion from the High Court decision makes clear that the court had to review the manner in which the arbitral institution considered evidence presented to it in the context of denying the application for emergency relief.
The High Court gave short shrift to the concern that its holding might undermine the LCIA rule under which the emergency arbitrator mechanism is “without prejudice” to the right to apply to a national court for injunctive relief. (As noted above, virtually every arbitral institution that has adopted rules for the appointment of an emergency arbitrator has such a “without prejudice” rule.) In essence, the court held that the “without prejudice” rule applies principally when the applicant has not yet sought such relief from the arbitral institution.
In this case, arguably it was “easy” for an English Court (a) to interpret the decision of a UK-based arbitral institution, and (b) to determine that, under such (identical) standard, Gerald Metals had already had its “bite at the apple.” But what about the case of an emergency arbitrator who decides to reject an application for interim injunctive relief when it is conceivable that the claimant will then apply to a court in a country other than the arbitral seat? Would such an emergency arbitrator feel a need to craft his/her ruling in a manner that makes it “easier” for a foreign court to conclude that the same standard for issuing injunctive relief exists before the arbitral institution and the “reviewing” court?
This question is far from a theoretical one, as demonstrated by the specific facts of the Gerald Metals case. In Gerald Metals, the main respondent was a trustee incorporated in Panama, the directors of which are based in Switzerland. Thus, after Gerald Metals failed in its attempt before the LCIA for injunctive relief, it was not a foregone conclusion that Gerald Metals’s only remaining option for obtaining interim relief against the trustee or its directors would be by applying to a court in the UK – as opposed to one either in Panama or in Switzerland. In other words, when the LCIA denied the emergency application, it was conceivable that an application for injunctive relief would then be filed before a court in Panama or in Switzerland.
As the business world becomes increasingly international, there will be many disputes with respect to which it will be possible to apply to a court in more than one country for interim relief.
In such situations, would it be good for arbitration, as an institution, for the emergency arbitrator to have to consider (be concerned about) how his/her decision denying injunctive relief might be reviewed by a court in a different legal system – especially if the arbitrator has no familiarity with such foreign legal system?
It is respectfully submitted that the answer is negative.
A sub-issue that needs to be asked: Would it be good for arbitration as an institution for the emergency arbitrator to have to invest the time/effort to guess as to those countries in which a disappointed claimant might seek injunctive relief from a court?
It is respectfully submitted that such time/effort would almost always result in a delay in issuing the emergency arbitrator’s ruling. And if so, that delay would undercut at least some of the efficiency of the emergency arbitrator option.