English High Court Refuses To Grant Urgent Relief Under the Arbitration Act 1996 Where Such Relief Could Be Granted Under LCIA Rules

This article comes courtesy of the Chartered Institute of Arbitrators where it was published in their quarterly magazine “The Resolver”.

Gerald Metals Sa v Timis & Ors [2016] EWHC 2327 (Ch)

THE CASE

GERALD METALS HAD ENTERED INTO AN ARRANGEMENT with Timis Mining (SL) Ltd whereby Gerald Metals advanced $50 million to the company to finance the development of an iron ore mine. The company was to sell the ore extracted to Gerald Metals and to deliver it in monthly shipments. The sum advanced was to be repaid in instalments that were to be deducted from the price of the shipments.

The company was controlled by a trust holding assets stated to be in excess of $2 billion. It’s trustee guaranteed payments of all sums due Gerald Metals under the arrangement up to a maximum of $75 million. The guarantee was subject to arbitration under LCIA Rules.

Following defaults by the company, Gerald Metals commenced arbitration proceedings against the trustee under the guarantee. Before the constitution of the tribunal, Gerald Metals applied to the LCIA for the appointment of an emergency arbitrator with a view to seeking emergency relief, including an order to prevent the trustee from disposing of the trust’s assets. It responded to the application by giving various undertakings.  Following these undertakings, the LCIA rejected the application for the appointment of an emergency arbitrator. Gerald Metals applied to the High Court for urgent relief under section 44 of the Arbitration Act 1996.

THE JUDGEMENT

The court considered its power to grant urgent relief under the Act. The test of urgency is by reference to the power and practical ability a tribunal has to grant effective relief within the relevant timescale.

Article 9 of the LCIA Rules provide that, in cases of exceptional urgency, any party may apply to the LCIA for the appointment of an emergency arbitrator or the expedited formation of the arbitral tribunal.

Leggatt J held that if an expedited tribunal could be constituted or an emergency arbitrator appointed within the relevant timeframe and the tribunal or emergency arbitrator could practically exercise the necessary powers, the test of urgency under section 44(5) of the Act could not be satisfied and the court would not have power to grant urgent relief.

As the LCIA had considered the application for an emergency arbitrator but had dismissed the application, there was not sufficient urgency to satisfy the requirements under Article 9and it could not be urgent enough to fall within section 44(3). The application was dismissed.

WHAT IT MEANS

Arbitration rules that give the parties options to obtain urgent relief may, as a result, preclude the courts from granting urgent relief.

The CIArb1 Arbitration Rules allow for the parties to opt out of the emergency arbitration rules, and parties wishing to retain the entitlement to apply to court for urgent relief may wish to consider excluding these provisions in the rules.

1Chartered Institute of Arbitrators