Gerald Metals SA V The Trustees of the Timis Trust & others  EWHC 2327
In an important recent decision on the intersection between emergency arbitrator provisions and applications to court for interim relief, the English High Court held that it was only entitled to provide interim relief to a party to an arbitration agreement where either an emergency arbitrator or an expeditiously formed tribunal were unable to provide the requested relief. The court also held that there was no substantive distinction between the various tests for interim relief in the LCIA Rules and section 44 of the Arbitration Act 1996, suggesting that if the LCIA Court denies an application for interim relief, the court will too.
The claimant, Gerald Metals, applied to the LCIA Court for both an emergency arbitrator (under LCIA Rule 9B) and expedited formation of the arbitral tribunal (under LCIA Rule 9A), on the basis that it needed an urgent interim freezing order. The LCIA Court declined both applications and so the claimant applied to the High Court for the same relief under section 44 of the Arbitration Act 1996.
Leggatt J declined to grant the application on the basis that the court could only provide such relief where the powers of the emergency arbitrator or tribunal were “inadequate, or where the practical ability is lacking to exercise those powers“.
He also held that the tests under the LCIA Rules for (a) the appointment of an emergency arbitrator (“in case of emergency“) and (b) the expedited formation of an arbitral tribunal (“exceptional urgency“) were effectively the same as the test of “urgency” under section 44 of the Arbitration Act 1996, stating that any other interpretation would be “uncommercial and unreasonable“. The fact that the LCIA Court had declined the claimant’s applications, therefore, made it unlikely that the court would grant them.
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 judge’s comments appear to restrict the court’s ability to assist parties to an 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 in LCIA Rule 9.12 that “[the emergency arbitrator provisions] shall not prejudice any party’s right to apply to a state court or other legal authority for any interim or conservatory measures before the formation of the Arbitration Tribunal; and it shall not be treated as an alternative to or substitute for the exercise of such right” (emphasis added). The judge dismissed the relevance of this provision, stating that it was only relevant to the right to apply and not to the substance of the powers. This could be considered an overly restrictive view of this provision and one which may dampen parties’ enthusiasm for the emergency arbitrator provisions (as discussed 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 needed 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” to allow a party to apply straight to court.
Should parties now opt-out of emergency arbitrator provisions under LCIA Rule 9.14?
The short answer is that it will depend on the parties’ decisions regarding the seat of the arbitration and the governing law of the contract, as well as the parties’ home jurisdictions and the subject matter of the dispute – the right to seek interim relief from the court is often viewed as important for IP related disputes, for example. In circumstances where recourse to the courts is crucial, opting out of the emergency arbitrator provisions may prevent the situation that arose in the present case.
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, such as Indonesia, 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.
We understand that the judgment is being appealed, although it is not yet known on what grounds. While the decision in the case was surely correct on the facts (i.e. Gerald Metals should not be granted a freezing injunction), the Court of Appeal will likely wish to examine the reasoning of the judge in relation to LCIA Rule 9.12.