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Sandra De Vito Bieri Liv Bahner lic.iur., LL.M., Attorney-at-Law LL.M., Maître en droit, Attorney-at-law Partner Associate Co-Head Arbitration Practice Group Phone +41 58 258 10 00 Phone +41 58 258 10 00 [email protected] [email protected] Emergency in Arbitration Is there an emergency before the arbitral tribunal has been constituted? Do you have to resort to state courts or does the arbitration clause in your agreement provide for quicker emergency relief? Skip the wait and request the appointment of an Emergency Arbitrator! 1. The Emergency Arbitrator At the outset of a dispute there are many ways how the opposing party could jeopardize the resolution of a dispute and render a final award futile. The opposing party may e.g. dispose of evidence relevant to the resolution of the dispute, abusively call of a bank guarantee or infringe exclusivity or confidentiality obligations. In all those scenarios, once the arbitral tribunal is constituted the aggrieved party may claim interim relief from the arbitral tribunal. But what shall the aggrieved party do if it has not yet or just initiated arbitration proceedings, however, the arbitral tribunal is yet to be constituted and the party's interest may be irreparably harmed by the conduct of the opposing party? Until a few years ago the only option was to seek interim relief in national courts, which most of the time rendered the request for interim relief very complex by involving several jurisdictions including alleged biases. Resorting to national courts may run counter to the entire spirit of arbitration desired by the parties, which is to resolve the dispute at an international level. This is where the emergency arbitrator may come on the scene. Most arbitral institutions have acknowledged the need to fill in the gap between the moment when a dispute arises and the constitution of the arbitral tribunal and have adopted emergency arbitrator provisions. The emergency arbitrator is thus appointed to deal with requests for urgent interim relief prior to the constitution of the main tribunal. With the appointment of an emergency arbitrator the parties may resolve their dispute entirely at the international level. In our experience emergency arbitration proceedings have not only proven to be an effective mean of obtaining urgent relief expeditiously prior to the constitution of the arbitral tribunal but also to serve for the parties and counsel as an early settlement tool. Bratschi Wiederkehr & Buob Ltd. Basel Berne Lausanne St. Gallen Zug Zurich Arbitration Newsletter September 2016 The complete list of our attorneys at law is published on our webpage: www.bratschi-law.ch/team Especially the emergency arbitrator provisions under the Swiss Rules have proven to provide high flexibility as well as effectiveness as demonstrated in the case Giedo van der Garde versus Sauber Motorsport: The race car driver Mr. Van der Garde initiated emergency arbitrator proceedings under the Swiss Rules against Sauber Motorsport because the latter denied the driver a guaranteed seat for the Sauber team’s 2015 lineup in the Formula One. The Emergency Arbitrator decided in favor of Mr. Van der Garde. Following an appeal by Sauber just a few days before the start of the 2015 Grand Prix season in Melbourne, the Victoria Supreme Court backed the emergency arbitrators ruling, enforcing it in Australia. Emergency arbitration is thus likely to remain a permanent part of the international arbitration land- scape due to its in most cases distinct advantages over state court proceedings. 2. Advantages of Emergency Arbitration 2.1 Neutrality and competence: The emergency arbitrator is appointed by the arbitral institutions. Emergency arbitration proceedings serve, therefore, as a neutral forum. Further- more, the arbitral institutions are diligent when it comes to the selection of the emergency arbitrator. The emergency arbitrator appointed by the arbitral institution will not only be familiar with (emergency) arbitration proceedings and disputes between international business partners but will also have the specialized legal and technical knowledge re- quired to decide the application and knows the language of the arbitration. 2.2 Speedy appointment: Emergency arbitrators typically issue their decisions expeditiously. Most arbitral institutions, which allow for emergency arbitrators require an arbitrator to be appointed within one or two days upon reception of the request. Many of them have also established deadlines for decisions to be issued, ranging from five days to 20 days after an emergency arbitrator is appointed. In one example from our practice, in an emergency arbitration under the Rules of the Singapore International Arbitration Center the emergency arbitrator was appointed one day after the application had been received by the institution. Within one day of his appointment the emergency arbitrator established a schedule for consideration of the application for emergency relief. As per the schedule, the parties made written submissions on the application and a telephonic hearing was conducted within one week of his appointment. The emergency arbitrator passed an order three days thereafter. 2.3 Confidentiality: Emergency arbitration proceedings as well as regular arbitration proceedings are often confidential, whereas court litigation proceedings are public. If the parties agreed to submit any dispute to arbitration, most of the time they chose arbitration proceedings with the intention to keep the business matter and any dispute arising thereof confidential. In light of the foregoing, the appointment of an emergency arbitrator fits the need for confidentiality while a request for interim relief in state courts would con- travene the parties’ aim to ensure the privacy of proceedings. Arbitration Newsletter September 2016 Page 2 | 14 2.4 Standard and Scope of Relief: The emergency arbitrator may order interim relief to the extent sought by the applicant. The measures range from preserving or restoring the status quo, anti-suit injunctions, interim payments and freezing assets. However, measures to be taken are not limited to certain types of relief. The scope of relief might thus be broader than the scope of relief the parties could obtain from state courts, as the above enumeration shows. Also, emergency arbitrators are free to determine the test to be applied in order to decide whether interim relief shall be granted. They may apply the law of the seat of the arbitration but could also rely on a so-called international test (in a nutshell, including the following criteria: reasonable possibility of success with the main claim, risk of irreparable harm, urgency and proportionality). The application of such international test gives the emergency arbitrator therefore more flexibility in order to meet the business needs of the parties. Moreover, interim relief ordered by an emergency arbitrator may cover several jurisdictions while the effectiveness of a court order is limited to the territory of the court. This will also prevent the parties from hiring local counsel in multiple jurisdictions. 2.5 Cost Efficiency: The appointment of the emergency arbitrator could also be less costly than referring the application for interim relief to state courts. This may in particular be the case where the decision of a court order is appealed or the state courts of several jurisdictions may be involved. 2.6 Pressure and Settlement Tool: Commercial arbitration is generally considered to be a less adversarial approach than hauling the other party into court. Many arbitrations arise from contracts, and it is likely that the parties are going to want to preserve the business relationship after the dispute is resolved. Emergency arbitrators can therefore be a useful tool in cases where the parties only need a little nudge to get settlement discussions moving in the right direction. In our experience also a favorable emergency arbitrator decision may put significant pressure on the respondent, which may again lead to settlement negotiations. From the applicant’s perspective emergency arbitration may also serve as useful tool to put pressure on the respondent, given that the applicants may be well prepared when filing the application for emergency arbitration while the respondent has at best a couple of days to develop a defense. Furthermore, respondents may also encounter difficulties to quickly find an appropriate counsel familiar with emergency arbitration proceedings and with the substance of the dispute. 2.7 Voluntary compliance: Even though the enforceability of the emergency arbitrator’s decision is questionable enforcement issues do not emerge in most cases, given that the parties voluntarily comply with the orders rendered by the emergency arbitrator. Volun- tary compliance is deemed to be encouraged for the following reasons: The parties fear that non-compliance with the emergency arbitrator’s decision may have a bad reputa- tional effect as the arbitral tribunal subsequently appointed might not value the non-compliance with a decision issued in the same arbitral institutional framework. Also, parties Arbitration Newsletter September 2016 Page 3 | 14 are likely to comply with the order because of the risk of cost awards and potential sanc- tions. Furthermore, the above mentioned case Giedo van der Garde versus Sauber Mo- torsport is a good example of a court’s willingness to provide effective and quick support to international emergency arbitration. 3. What to consider when drafting the arbitration clause Under most rules of arbitral institutions the emergency arbitration proceedings apply by default. That means that the emergency arbitration rules may be triggered if parties have opted to arbitrate their dispute under a certain set of institutional arbitration rules. However, not every arbitration agreement is deemed to include the potential appointment of an emergency arbitrator, e.g. under the Arbitration Rules of the International Chamber of Commerce the arbitration agreement must be concluded after January 1, 2012 to have the emergency arbitration provisions to be included.

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