New LCIA Rules limit High Court’s powers to grant interim relief

28/09/16

Gerald Metals SA v. The Trustees of the Timis Trust & others [2016] EWHC 2327

Section 44 of the Arbitration Act 1996 gives the High Court certain powers in relation to arbitral proceedings. In particular, section 44(3) states 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.” This is subject to subsection 44(5), which says that “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”.

Section 44 has traditionally been particularly useful when interim relief is needed in the typically lengthy period taken to constitute an arbitral tribunal. However, it is becoming increasingly common for arbitration rules to provide for an emergency arbitrator or the expedited formation of the tribunal in urgent cases. One example is the provisions contained in Articles 9A and 9B of the 2014 version of the LCIA Rules. These allow the LCIA to act in cases of “exceptional urgency” and “emergency” respectively. Their effect on the courts’ powers under section 44 of the 1996 Act has now been considered by the Commercial Court.

In Gerald Metals, upon an application to the LCIA by an arbitration claimant alleging a need for urgent interim asset freezing relief, the LCIA had declined to appoint an emergency arbitrator or apply the expedited procedure for the formation of the arbitral tribunal under Articles 9A and 9B of the 2014 LCIA Rules.

Pending the constitution of the arbitral tribunal in the normal course, the claimant sought similar interim relief from the Commercial Court under section 44 of the 1996 Act. The claimant argued that section 44 left scope for an application to the Commercial Court in a case of “urgency” (within subsection 44(3)) which was not as great as the “exceptional urgency” required under Article 9A of the LCIA Rules. The respondents argued that there was no role for section 44 in such a case and that the tests were effectively the same.

Leggatt J dismissed the claimant’s application for relief, holding that it would be “uncommercial and unreasonable” to interpret the LCIA Rules as the claimant contended. The purpose of the new provisions in the 2014 LCIA Rules is to reduce the need to resort to the court. To make commercial sense of those provisions, a similar functional interpretation of Articles 9A and 9B needs to be given as has been given to subsection 44(3). The test of “exceptional urgency” under Article 9A is whether effective relief could not otherwise be granted within the relevant timescale. Likewise, the test of “emergency” under Article 9B is whether relief is needed more urgently than the time it would take for the expedited formation of the arbitral tribunal.

It was common ground between the parties that section 44 still has a role, even in respect of arbitrations under the 2014 LCIA Rules, where relief is needed so urgently that the power to appoint an emergency arbitrator is insufficient – for example if an application needs to be made without notice.

The judgment is here.