English High Court Elects Not to Intervene Where Emergency Arbitral Procedures Are Available

In the recent English High Court judgment Gerald Metals S.A. v Timis & Ors [2016] EWHC 2327 (Ch), Mr Justice Leggatt provided the first guidance regarding the interaction of the Court’s powers to grant interim or conservatory measures in support of arbitration with the provisions for emergency measures in arbitration. Such emergency provisions, including expedited appointment of arbitration tribunals and emergency arbitrators, have proliferated among institutional rules in recent years. His guidance suggests that, where arbitral rules provide for such procedures, but the arbitral institution has declined to activate them in support of a party’s application, the English Court will now be loath to interpose its own measures.

Gerald Metals had initially approached the LCIA for an emergency arbitrator and expedited formation of the tribunal under LCIA Rules Articles 9A and 9B. The LCIA had refused those appointments. Gerald Metals then applied under section 44 of the Arbitration Act 1996 for a freezing injunction against the Timis Trust, with an upper limit of $80,000. They also sought an order for the provision of information by the Trust of its worldwide assets, and details of the ownership and value of Senegalese oil interests relevant to the underlying arbitration.

The Court’s powers to grant such relief under s. 44 are tempered by ss. 44(3) and (5), which provide that:

"If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.
…
In any case, the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively."

As Mr Justice Leggatt noted, the parties were agreed that the test for urgency in the use of the Court’s section 44 powers is to be assessed by reference to whether the arbitral tribunal has the power and the practical ability to grant effective relief within the relevant timescale (Starlight Shipping v Tai Ping Insurance [2008] 1 Lloyd’s Rep 230, paras 22, 24, 27).

The parties were also agreed that there can be situations where, despite the existence of emergency arbitration procedures, the need for relief makes the Court’s intervention appropriate – such as an application that needs to be made without notice. Applications for emergency procedures under the LCIA Rules must be made on notice to all parties to the arbitration.

However, in the particular case, Gerald Metals argued that the LCIA Rules created a 'gap' where emergency procedures were not merited under those rules, but 'urgency' within the meaning of s. 44(3) would still exist to justify the Court’s intervention. Mr Justice Leggatt declined this interpretation, stating:

"The obvious purpose of Articles 9A and 9B is to reduce the need to invoke the assistance of the court in cases of urgency by enabling an arbitral tribunal to act quickly in an appropriate case. It seems to me that to make commercial sense of the provisions a similar functional interpretation of Articles 9A and 9B needs to be adopted as has been given to section 44(3) of the Arbitration Act. In other words, the test of exceptional urgency must be whether effective relief could not otherwise be granted within the relevant timescale – the relevant timescale for this purpose being the time which it would otherwise take to form an arbitral tribunal. Likewise, under Article 9B the test of what counts as an emergency must be whether the relief is needed more urgently than the time that it would take for the expedited formation of an arbitral tribunal. That, in my view, is the rational interpretation of these rules."¹

Mr Justice Leggatt also considered the impact of Article 9.12 of the LCIA Rules, which declares that the Article 9B emergency arbitrator procedure is not to be construed as "an alternative to or substitute for" any powers of the Court to grant interim or conservatory measures. He found that Article 9.12 did not affect the position, given the qualified nature of the Court’s powers found in section 44 in any case.

The Court ultimately found that only where emergency arbitral procedures "are inadequate, or where the practical ability is lacking to exercise those powers, … the court may act under section 44."²

Comment

Mr Justice Leggatt’s ruling is another instance of the English Court’s tendency to defer to the arbitral process. In circumstances where emergency procedures are in place under arbitration institutional rules, the parameters under which a successful approach to the Court for use of its s. 44(3) powers in their stead are likely to be limited to scenarios where: (i) there is reason for an application to be made without notice (which procedure is not available under arbitral institutional rules providing for such emergency arbitrator measures); or (ii) the application involves third parties who are not bound by the arbitration agreement.

The fact that the judgment is in response to a rejection by the LCIA Court to appoint an emergency arbitrator is also notable – according to LCIA statistics for 2014 and 2015 (the first years emergency measures were available under those rules) no requests were made to the LCIA Court for an emergency arbitrator appointment. It would thus appear that one of the first attempts to invoke the procedure at the LCIA was declined. By comparison, all 50 applications for an emergency arbitrator have been accepted by the Singapore International Arbitration Centre since the procedure’s inception under those rules in 2010.

Depending upon the broader circumstances, the Court’s position may invite parties to consider whether they would want to opt out of emergency procedures in arbitral rules when drafting their commercial contract dispute resolution provisions, should they wish to preserve a fuller range of English Court intervention in the arbitral process. When doing so in the particular context of LCIA arbitration, commercial parties would benefit from consulting the June 2015 LCIA Guidance Notes on Emergency Procedures. These include "case studies" which consider whether the requirement of "exceptional urgency" for the expedited formation of a tribunal is likely to be satisfied, although the Notes are not binding.

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¹ Gerald Metals S.A. v Timis & Ors [2016] EWHC 2327 (Ch), para. 7 at pp. 16-17.

² Gerald Metals S.A. v Timis & Ors [2016] EWHC 2327 (Ch), para. 8 at p. 17.

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