Urgent interim relief: LCIA Rules limit court’s powers

Practical Law UK Articles 5-636-2356 (Approx. 4 pages)

Urgent interim relief: LCIA Rules limit court’s powers

by Julianne Hughes-Jennett and Richard Trinick, Hogan Lovells

The application

Gerald Metals SA applied to the LCIA Court for both expedited formation of the arbitral tribunal under Article 9A of the LCIA Rules (Article 9A) and an emergency arbitrator under Article 9B of the LCIA Rules (Article 9B), on the basis that it needed an urgent interim freezing order. The LCIA Court declined both applications and Gerald Metals applied to the High Court for the same relief under section 44 (see box "The relevant provisions").

The court declined to grant the application on the basis that, under section 44(5), it can only provide this relief where the powers of the emergency arbitrator or tribunal are inadequate or where there is no practical ability to exercise those powers.

The court also held that the tests of "exceptional urgency" under Article 9A and "in case of emergency" under Article 9B were effectively the same as the test of "urgency" under section 44, stating that any other interpretation would be uncommercial and unreasonable. The fact that the LCIA Court had declined Gerald Metals' applications therefore made it unlikely that the court would grant them.

Practical implications

On the one hand, this decision can be viewed as an attempt by the court to be arbitration-friendly and not allow parties a second bite at the cherry once the LCIA Court has denied an application for interim relief. On the other hand, the court’s comments appear to restrict its ability to assist parties to an LCIA arbitration by forcing parties to turn first to the LCIA emergency provisions.

This is arguably not what the parties will have had in mind when choosing the LCIA Rules, which expressly state that Article 9B does not prejudice a party’s right to apply to a state court or other legal authority for any interim or conservatory measures before the arbitral tribunal is formed, and that Article 9B should not be treated as an alternative to, or substitute for, the exercise of this right (Article 19.12, LCIA Rules) (Article 19.12).

The court dismissed the relevance of Article 9.12, stating that it was only relevant to the right to apply for relief and not to the substance of the court’s powers. This could be considered an overly restrictive view of Article 9.12 and one which may dampen parties’ enthusiasm for Article 9B (see below).

However, it was common ground between the parties that the application of the LCIA emergency provisions would not prevent a party applying for interim relief from the court where a matter is so urgent that a party cannot wait for an emergency arbitrator, or where an application needs to be made without notice. While this suggests a continued role for the courts in such a situation, it is not yet clear what situations will be classified as so urgent as to allow a party to apply straight to the court.

Opting out of Article 9B

Parties to an LCIA arbitration may agree in writing to opt out of Article 9B (Article 19.14, LCIA Rules). Whether parties will wish to do so will depend on their decisions regarding the seat of the arbitration and the governing law of the contract, as well as their home jurisdictions and the subject matter of the dispute; for example, the right to seek interim relief from the court is often viewed as important for intellectual property-related disputes. In circumstances where recourse to the courts is crucial, opting out of Article 9B may prevent the situation that arose in Gerald Metals.

If, however, there is a possibility of a party requiring interim relief in a jurisdiction where the local courts do not have such a concept or from courts where any interim relief will not be granted efficiently, then there may be value in maintaining the option of recourse to an emergency arbitrator.

In this sense, Gerald Metals should not affect the question of whether to provide for emergency arbitrators. In some circumstances, it will suit a party to opt out of Article 9B, but in others there will be a value in retaining it. While the decision creates some unwelcome uncertainty, it is likely that the rather unusual facts (not least the failed applications to the LCIA) would allow it to be distinguished without too much difficulty.

Next steps

We understand that Gerald Metals is being appealed, although it is not yet known on what grounds. While the decision was surely correct on the facts, that is, Gerald Metals should not be granted a freezing injunction, the Court of Appeal will likely wish to examine the court’s reasoning in relation to Article 9.12.

Julianne Hughes- Jennett is a partner and member of the ICC Task Force on Emergency Arbitrator Provisions, and Richard Trinick is an associate, in the London office of Hogan Lovells.

The relevant provisions

Under the London Court of International Arbitration (LCIA) Rules:

In the case of exceptional urgency, a party can apply to the LCIA Court for the expedited formation of the arbitration tribunal (Article 9A).
In the case of emergency, a party may apply to the LCIA Court for the immediate appointment of a temporary arbitrator to conduct emergency proceedings pending the formation of the arbitral tribunal (Article 9B).

Under the Arbitration Act 1996, the court may:

If the case is one of urgency, make such orders as it thinks necessary for the purpose of preserving evidence or assets (section 44(3)).

Act only if, and to the extent that, the arbitral tribunal has no power or is unable for the time being to act effectively (section 44(5)).

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