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Out-Law Guide 11 min. read

Construction disputes and FIDIC: enforcement through emergency arbitration

Emergency arbitration gives parties a mechanism to obtain interim relief without waiting for the constitution of the arbitral tribunal that is to finally determine an issue in dispute, something which can often take several months.

Emergency arbitration is a relatively new and developing process in international arbitration and can be used in some circumstances where a debtor fails to honour a decision by a dispute adjudication board (DAB) or dispute avoidance / adjudication board (DAAB) constituted under the FIDIC Red Book.

Over the last 10 years, many leading arbitral institutions such as the International Chamber of Commerce (ICC), Singapore International Arbitration Centre (SIAC), Hong Kong International Arbitration Centre (HKIAC), London Court of International Arbitration (LCIA) and Arbitration Institute of the Stockholm Chamber of Commerce (SCC) have introduced emergency arbitrator procedures when amending their rules to make arbitration more responsive to users’ needs.

Read more on construction disputes under the FIDIC Red Book

Construction disputes and FIDIC: how the 1999 Red Book deals with disputes

Construction disputes and FIDIC: tackling the enforcement gap

Sub-Clause 21.4.3 of 2017 FIDIC Red Book provides that a dispute board decision “shall be binding on both Parties, who shall promptly comply with it whether or not a Party gives a NOD with respect to such decision under this Sub-Clause”. A similar provision (but no reference to NOD) is found at Sub-Clause 20.4 of the 1999 FIDIC Red Book. However, as we have seen in the earlier parts of this series, it is not uncommon for the debtor to fail to honour the DAB’s or DAAB’s decision in practice, leaving the creditor needing a mechanism to enforce the debtor’s compliance.

The final stage of the multi-tiered dispute resolution procedure provided under the FIDIC Red Book is arbitration. However, in many cases, the time required for a final award to be rendered could be extensive. This is not ideal for parties that need immediate relief. For example, a party may need to urgently stop a counterparty from disposing of assets or prevent a breach of contract pending the final resolution of the dispute. In such cases, emergency arbitration can provide an effective solution to parties seeking immediate relief.

Emergency arbitration allows parties to obtain interim relief without waiting for the constitution of the arbitral tribunal that is to finally determine the issue, which can often take several months. Parties may commence emergency arbitration before the Request for Arbitration is filed or in between the filing of such request and the constitution of the arbitral tribunal. This procedure is designed to provide a fast, cost-effective and efficient way of obtaining urgent interim measures.

The emergency arbitrator has the power to issue preliminary orders and make other interim measures necessary to preserve the status quo pending the constitution of the arbitral tribunal. This is done in a manner similar to an application for interlocutory/interim relief before a court.

The relief sought in emergency arbitration is primarily injunctive in nature, both prohibitive and mandatory. Examples include orders:

  • to maintain or restore the status quo;
  • to preserve evidence or assets;
  • to prevent a party from calling on performance bonds/guarantees;
  • for the counterparty to continue performing its obligations under a purportedly terminated contract; and
  • for the award of security for costs.

What are the relevant considerations when initiating an emergency arbitration?

The applicable procedure will depend on the arbitral rules. Taking the ICC Rules as an example, Article 29(6) stipulates that emergency arbitration is not available if: the arbitration agreement was executed before 1 January 2012 when the emergency arbitrator procedure was introduced; the parties have expressly opted out of the provision; and the arbitration agreement arises from a treaty.

Besides these restricting factors, parties must also meet an urgency threshold to successfully commence an emergency arbitration. This threshold is outlined in article 29(1) of the ICC Rules, which provides a party must prove that it requires “urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal”. This point was considered by the English court in the 2016 case of Gerald Metals v Timis, which ruled “the test of what counts as an emergency must be whether the relief is needed more urgently than the time it would take for the expedited formation of an arbitral award”.

Other rules may provide further or different factors to be taken into account. For example, the emergency arbitration procedures under the HKIAC Administered Arbitration Rules provide a non-exhaustive list of considerations that should be taken into account including whether “harm not adequately reparable by an award of damages is likely to result” and whether “such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted” (Article 23.4(a)).

Timeframe for commencing an emergency arbitration

The table below sets out the relevant timeframes in an emergency arbitration under the applicable rules of the ICC, SIAC and HKIAC.

The table indicates the brevity of the process, from the request to commence to the emergency arbitration award, which is typically just over two weeks. This is why emergency arbitration can provide a timely solution in the case of urgency.

  Emergency arbitration provisions  Article 29 and Appendix V  Article 30 and Schedule 1  Article 23 and Schedule 4
 Time for appointment of  emergency arbitrator  Within two days of the Secretariat receiving the application. (Article 2(1) of Appendix V)  Within one day of the Registrar receiving the application. (Paragraph 3 of Schedule 1)  Within 24 hours of the Registrar receiving the application and the application deposit. (Paragraph 4 of Schedule 4)
 Time for rendering a decision  No later than 15 days from the date the file was transferred to the emergency arbitrator. (Article 6(4) of Appendix V)  No later than 14 days from the date the emergency arbitrator was appointed. (Paragraph 9 of Schedule 1)  No later than 14 days from the date the file was transferred to the emergency arbitrator. (Paragraph 12 of Schedule 4)

Enforceability of emergency arbitration rulings

Despite the proliferation of institutions offering the procedure, there may be uncertainties in some jurisdictions as to the enforceability of interim awards issued by an emergency arbitrator. This is a factor parties should consider before embarking on the process and may be one of the main reasons deterring or discouraging parties from commencing emergency arbitration.

It is unclear whether an award obtained pursuant to an emergency arbitration falls within the ambit of the New York Convention as the treaty only governs awards that are “final and binding”. There remain doubts as to whether an emergency arbitration award will be considered “final and binding” given its interim nature.

The enforceability of an interim award will also depend on the laws specific to the jurisdiction in which enforcement is sought. Whilst some countries have specifically amended their legislation to recognise and enforce emergency arbitration awards, most countries remain silent as to their positions in this regard.

The approach of some of the major dispute resolution centres in respect of the enforceability of emergency arbitration awards is set out below.

 Jurisdiction  Enforceability
 United Kingdom
  • The Arbitration Act 1996 does not refer to emergency arbitrator and as a result, there is a concern as to whether an emergency arbitrator is deemed to be an arbitrator under the governing legislation.                     
  • Enforcement under section 66 is only available in respect of “an award pursuant to an arbitration agreement”.                     
  • Having said that, an award issued by an emergency arbitrator is in principle capable of being enforced under section 66.     
  • Under the International Arbitration (Amendment) Act 2012, an emergency arbitrator has the equivalent status to a properly constituted arbitral tribunal. 
  • Consequently, the emergency arbitrator's order/award will be enforceable in Singapore.
 Hong Kong SAR
  • Under the Arbitration Ordinance (Cap. 609), the court has the power to enforce any award made by an emergency arbitrator. 
  • Emergency relief is enforceable with leave of the court, whether the relief is granted by an emergency arbitrator within Hong Kong SAR or in another jurisdiction.       
  • However, the court can only grant leave to enforce an emergency relief granted outside of Hong Kong SAR if certain requirements are met.
  • The PRC Arbitration Law does not include provisions for emergency arbitrators.
  • If a party seeks emergency relief in China, it must apply to a Chinese court to obtain the necessary relief.
  • CIETAC's emergency arbitrator provisions are mainly applicable to arbitrations administered by the CIETAC Hong Kong Arbitration Centre.
  • Although the Federal Arbitration Law of the UAE does not make specific provisions for emergency arbitration, it recognizes the arbitral tribunal's power to grant interim awards.
  • A party to arbitration can apply for the court to enforce an interim arbitral order within 15 days of the order.

The recent introduction of emergency arbitration also means that case law on enforcement is relatively limited. This lack of clarity can create uncertainty for parties and potentially undermine the effectiveness of the emergency arbitration process. As an alternative, parties may seek the assistance of a local court for interlocutory relief if that is available. However, this is not always ideal as parties need to rely upon local law remedies, and local court systems may not be well developed or entirely impartial towards foreign parties.

In our recent experience, however, we have found that parties do tend to comply with emergency arbitration interim awards, and therefore the issue of enforceability has fallen away. This is because parties seek to avoid any negative impression of their conduct when the dispute is raised to the arbitral tribunal that finally determines the issue.

As emergency arbitration becomes more frequently used, national legislation and governing institutions will likely provide clearer guidance as to the status of emergency awards and the powers of emergency arbitrators to promote the use and effectiveness of this dispute resolution mechanism.

Co-written by Grace Fok of Pinsent Masons.

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