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Newsletter | December 2013
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INTERNATIONAL ARBITRATION & CROSS-BORDER LITIGATION |
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Increase in the Use of Emergency Arbitrator to Resolve International Disputes and Its Impact |
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In international arbitration, cases arise where one party fraudulently transfers or conceals assets during the time period between the commencement of the arbitration and the constitution of the Arbitral Tribunal, which may take several months. Such tactics may limit the effectiveness of international arbitration. Consequently, major Arbitral Institutions are adopting an Emergency Arbitrator Procedure, through which Emergency Interim Relief can be obtained prior to the appointment of the arbitrator or tribunal. |
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Recently, the use of Emergency Arbitrator Procedures has been increasing, and the scope of the interim relief sought is also expanding from the freezing of assets to so-called anti-suit injunctions, which prohibit the pursuit of legal action in other jurisdictions. For example, Kim & Chang represented a foreign party in a recent SIAC arbitration where the Emergency Arbitrator rendered an interim award ordering the counter-party to withdraw its application for a preliminary injunction, which was pending before the Korean court. |
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In that case, a dispute arose between a Korean shipyard and a foreign buyer over a shipbuilding contract. The shipyard was concerned that the buyer would call upon the on-demand guarantee issued by the shipyard’s financing bank in favour of the buyer, and the yard consequently filed an application for preliminary injunction before the Korean court, seeking to restrain the payment. The buyer filed an application with SIAC for the appointment of an Emergency Arbitrator, seeking emergency interim relief for barring the preliminary injunction action. SIAC promptly appointed the Emergency Arbitrator, and the Emergency Arbitrator rendered an interim award ordering the shipyard to withdraw the application for preliminary injunction in only a 3 weeks’ time, following the exchange of submissions between the parties and a one day hearing. |
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SIAC has handled about 30 cases involving Emergency Arbitrators since the adoption of the Emergency Arbitrator Procedure in its 2010 Revised Arbitration Rules. The situation appears to be similar for other major arbitral institutions as well. The Emergency Arbitrator Procedure can have an impact on the parties’ rights and obligations, which may even bar the seeking of relief in ongoing domestic court proceedings. Therefore, if a party enters into an arbitration agreement referring to Arbitration Rules that provide for an Emergency Arbitrator Procedure, and a dispute arises, it is advisable for the party to consult with its legal experts to review the feasibility, benefits and risks of the Emergency Arbitrator Procedure at the early stages of the dispute. |
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