Dr. Oveis Rezvanian[2]
Dr. Mohammad Hossein Tavana[3]
I. Introduction
Tehran Regional Arbitration Center (‘TRAC’) is an independent international organization, established under the auspice of the Asian-African Legal Consultative Organization (‘AALCO’).[4] The agreement to establish TRAC was signed between AALCO and the Islamic Republic of Iran in May 1997 and came into force in July 2004 following the ratification by the Iranian legislative bodies. TRAC effectively commenced its activities a year later when the Arbitration Rules (‘the 2005 TRAC Rules’) was published in July 2005.
The 2005 TRAC Rules were based on the 1976 Arbitration Rules of the United Nations Commission on International Trade Law (‘UNCITRAL’), with certain modifications to make those rules suitable for institutional arbitration. In the same way, the new set of Arbitration Rules (‘the 2018 TRAC Rules’), effective as of March 1, 2018, are based on the 2010 Arbitration Rules of UNCITRAL, with some innovative features to meet the business users’ needs and be synchronized with the recent developments of international commercial arbitration. In particular, the 2018 TRAC Rules provide for the expedited procedure under Article 5, as well as the emergency arbitration procedure under Article 27.2 and its Appendix I, encompassing 14 articles. These two procedures are unprecedented under the Iranian law and are introduced by the 2018 TRAC Rules into the Iranian legal system.
At the time of writing this article, TRAC has not received any requests for emergency arbitration procedures yet. In a case recently filed, although the amount in dispute was less than EUR 1,000,000 and met the requirement for the expedited procedure, the parties refused to request for such procedure as each side wished to exercise its right to appoint a co-arbitrator in the panel of three arbitrators. That is, none of the innovative features discussed below are actually applied in an arbitral proceeding administrated by TRAC and, therefore, the contents and findings are merely based on the provisions of the 2018 TRAC Rules as well as the requirements under the Iranian arbitration regime.
II. Emergency Arbitration Procedure
Background
After a dispute arises, it might very often happen that a party to the dispute requires an emergency measure, especially before the constitution of the arbitral tribunal. In such circumstances, the parties may ask the competent State court for an emergency measure. However, for the same reasons that the parties have chosen arbitration as the ultimate method for resolution of their disputes, including confidentiality, the recourse to the State court for emergency measure before the constitution of the tribunal may not be desirable. In an ad hoc arbitration, it is hard to imagine a solution other than State court’s assistance, while the situation in an institutional arbitration may substantially differ due to the mechanism that arbitral institutions have envisaged in their rules.
The first attempt of this type, i.e. a mechanism for granting an interim measure outside the courtroom prior to the constitution of an arbitral tribunal, was the Pre-Arbitral Referee Procedure introduced by the International Court of Arbitration of the International Chamber of Commerce (‘ICC’) in 1990. According to Article 2.1 of the ICC Pre-Arbitral Referee Procedure Rules, the referee is empowered to grant an emergency measure request prior to the constitution of the tribunal. Although, the Pre-Arbitral Referee Procedure was generally welcomed as an innovative solution by the scholars at the time when it was introduced, [5] it was not immediately used by the practitioners and remained dormant for more than a decade.[6] A reason for this postponed practice was the fact that the parties should have concluded an agreement in writing giving their consent to the use of the procedure according to Article 3 of the ICC Pre-Arbitral Referee Procedure Rules and the limited use of this procedure is generally blamed on its opt-in character.[7] Furthermore, the nature of the decision of the referee was a matter of question: whether it is an order or it may qualify as an award.[8] Due to these two important reasons, arbitral institutions have followed another solution which is widely known as the emergency arbitration procedure incorporated also into the 2018 TRAC Rules.
Jurisdiction
The emergency arbitration procedure, introduced by Article 27.2 of the 2018 TRAC Rules and elaborated under Appendix I, is an option for the party who wishes to seek an interim measure prior to the constitution of the tribunal. Nevertheless, it should be taken into account that Article 27.3 of the 2018 TRAC Rules acknowledges the right of the parties to ask for an interim measure from the State court before and after the constitution of the tribunal. At the same time, it should be noted that the parties also irrevocably waive their rights to any form of appeal, review or recourse to any State court or other judicial authority with respect to decision of an emergency arbitrator according to Article 12 of Appendix I. In other words, when the decision is made by an emergency arbitrator, the parties have no further right to recourse to a State court in that particular matter.
Contrary to the requirement for the ICC Pre-Arbitral Referee Procedure, there is no need to sign a separate written agreement in order to create the basis for the jurisdiction of an emergency arbitrator under the 2018 TRAC Rules. While, the will of the parties is the basis of arbitration in its entirety, the parties’ consent to the emergency arbitration procedure is presumed to be acquired by their agreement on TRAC arbitration according to Article 12 Appendix I. Similar to an arbitral tribunal, the emergency arbitrator has the competence to rule on his own jurisdiction according to Article 7 of Appendix I.
While the decision of an emergency arbitrator could be rendered in the form of an order or an award and there is no restriction with respect to the form, the emergency arbitrator is under the obligation to state a summary of the reasons according to Article 8 of Appendix I. Furthermore, it should be borne in mind that even if the decision is issued in the form of an award, it is not the ultimate resolution of the dispute and does have a temporary nature, as the arbitral tribunal, upon its constitution, has the full discretion to reconsider, modify or vacate the decision of an emergency arbitrator. In any event, by virtue of Article 10 of Appendix I, the decision of an emergency arbitrator ceases to be binding if the arbitral tribunal is not constituted within 90 days from the issuance of the decision or when the arbitral tribunal makes a final award or if the claim is withdrawn.
Criteria
The 2018 TRAC Rules have not enumerated the conditions for taking into consideration an application for the emergency arbitration procedure. Nevertheless, according to Article 1 of Appendix I, the requesting party shall state, among other things, the reasons for its entitlement to the requested measure in the application. The requirement to demonstrate a manifest entitlement to an emergency measure is in line with the jurisprudence of the International Court of Justice on the matter.[9]
In the view of the authors, there should exist the elements of urgency and risk of irreparable damages as well as a reasonable chance of success in merits for accepting the application and appointing an emergency arbitrator by the Centre. If the emergency arbitrator finds a risk of damages to the party against whom the request for an emergency measure is granted, he or she may condition enforcement of the decision to disposing of an appropriate security by the granted party according to Article 11 of Appendix I.
Timeline
Speed is perhaps one of the most salient features of emergency interim measure. According to Article 1 of Appendix I, the submission of the application for the emergency arbitration procedure should be submitted concurrent with or following the filing of a notice of arbitration, but prior to the constitution of the arbitral tribunal. This is sensible by considering the fact that emergency arbitrator shall have no power to act after the arbitral tribunal is constituted by virtue of Article 10 of Appendix I.
The time schedule for the emergency arbitration procedure is designed for the matter of efficiency: one day for the Centre to appoint the emergency arbitrator; two days for the parties to make the possible challenges; and two days for the arbitrator to establish the procedural timetable. Except in specific circumstances, the decision of the emergency arbitrator shall be rendered within fourteen days from the date of his appointment by the Centre. The emergency arbitrator, however, shall ensure that reasonable opportunities are provided for both sides to be heard. Lastly, it is to be noted that the urgency is the central factor in the emergency arbitration procedure. Considering this factor, Article 14 of Appendix I invests the emergency arbitrator with the required discretion to make the final decision about the proper way in which the 2018 TRAC Rules are applied in this regard. Furthermore, the latter part of Article 14 empowers the Centre to shorten the deadlines in the emergency arbitration procedure in the interest of urgency.
Enforcement and Setting Aside
As the first remark on the enforcement, one should be mindful of the fact that before the constitution of the tribunal, the emergency arbitration procedure is not a replacement for the State court to which an interim measure is requested, but it is an option parallel to it. It is the requesting party who should decide which route is wiser to take based on the special circumstances of the case at hand. It is the authors’ prediction that a rather high percentage of parties to the domestic disputes administered by TRAC still prefer to have a recourse to the State court in order to obtain an interim measure for different reasons, including the challenges that might arise in the enforcement phase. In other words, the authors expect that this solution is more used by a party who gives a higher value to the issue of confidentiality or by parties to an international arbitration under the TRAC Rules.
Having said that, the issue of enforcement of an emergency arbitration decision, in general, should not be a major concern, especially if it is rendered in the form of an award. Meanwhile, the decision of an emergency arbitrator in the form of an order, for certain, is not subject to a court review and a setting aside procedure, though it enjoys an inferior level of enforceability in comparison with an award. Nevertheless, it should be borne in mind that, as pointed above, by agreeing to TRAC arbitration, parties have viewed their rights to any form of appeal, review or recourse to any State court or other judicial authority with respect to decision of an emergency arbitrator. While this provision serves the purpose of efficiency, it perfectly complies with the procedural norms and mechanisms for the supervision of the process of decision making by an emergency arbitrator, as the decision has basically a temporary nature even if it is rendered in the form of an award and the arbitral tribunal could alter the decision after its constitution.
Finally, it could be concluded that although the 2018 TRAC Rules try to increase the probability of enforcement by leaving the discretion to an emergency arbitrator to decide about the form of the decision, i.e. an order or an award, no institutional rules can dictate whether the decision of an emergency arbitrator is enforceable under national arbitration laws and international conventions, as the State courts have the final word on the matter.[10]
III. Expedited Procedure
Background
One of the initial promises of arbitration was to provide tailor-made solutions for different types of disputes in a private forum. Unlike the court proceeding which has a sole answer to all requests, arbitration came into play with the pledge to solve each dispute with a customized procedure, considering the nature and size of the dispute at hand. However, in the recent years, there has been an increasing dissatisfaction with the inflexibility of arbitration as well as its inability to accommodate the needs in different types of disputes.[11] As observed by Professor Shaughnessy, “[arbitration has] grown more complex, costly, combative, and time-consuming”[12] and practitioners coming from different backgrounds have complained about the so-called ‘judicialization’ of arbitration.[13] These complaints have also targeted the arbitral institutions which offer only a one-fit-all solution for every and all disputes, from a tiny to a huge one.
In response to such complaints, a number of arbitral institutions have offered more customized solutions considering the nature and size of each dispute. The expedited arbitration procedure is an attempt in this line which allows parties to resolve small disputes in a speedier and more flexible way.
Procedure part, of the Emergency Arbitration Expedited Procedure Tehran Regional Arbitration Center
The 2018 TRAC Rules, Article 5 allows each party to request for expedited procedure, provided that the total amount in dispute does not exceed EUR 1,000,000. Larger disputes can be also referred to this mechanism in case of a mutual agreement by the parties on the matter. Also, in cases of urgency and at the discretion of the Centre, a dispute might be dealt with in an expedited procedure, even if it does not meet the above requirements.
The request for an expedited procedure shall be filed at any time before the constitution of the tribunal pursuant to Article 5.1 of the 2018 TRAC Rules. Furthermore, this article provides that the requesting party shall directly send a copy of this application to the other party. The other party are then provided with the opportunity to express their view on the application of the expedited procedure and the Centre shall eventually make the final decision in this regard. Despite the fulfilment of the requirements mentioned under Article 5.1 of the 2018 TRAC Rules, the Centre still has a wide discretion to apply the procedure or decide otherwise, by considering other circumstances, including the complexity of the case. The 2018 TRAC Rules do not set forth a clear procedure for acquiring the parties’ view as well as rendering the Centre’s final decision, but obviously they shall be conducted in a timely manner.
Once the Centre determines that the case shall be proceeded in accordance with the expedited procedure, it has the discretion to abbreviate the deadlines provided under the Rules. In addition, according to Article 5.2.b of the 2018 TRAC Rules, the case shall be referred to a sole arbitrator, regardless of the parties’ previous agreements, unless the Centre decides otherwise. Here a question might arise concerning the compatibility of this provision with the principle of party autonomy as the basis for arbitration. Especially, by considering the provision under Article 10 of the Iranian Law on International Commercial Arbitration (‘the LICA’) providing for three arbitrators in the absence of other agreements between the parties, the question persists on whether and how the Centre can change the parties’ choice and thus, refer the case to a sole arbitrator.
In the authors’ viewpoint, this should not be considered against the parties’ choice, as by referring the disputes to the TRAC Rules which provide for, inter alia, a clear mechanism for the expedited procedure, the parties had made a more overriding choice. That is, similar to all other procedural aspects of arbitration, the appointment of a sole arbitrator for arbitrations with less than a certain amount in a dispute was included in the Rules and, therefore, agreed by the parties. In addition, Article 5.3 of the 2018 TRAC Rules stipulates that by agreeing to arbitration under these Rules, the parties agree that, where arbitral proceedings are conducted in accordance with the expedited procedure, the rules and procedures set forth above, including the appointment of a sole arbitrator, shall apply, even in cases where the arbitration agreement contains a term on the contrary.
Another concern that remains is about the situation where parties have concluded an arbitration agreement with three arbitrators before March 2018, when the new set of TRAC Rules were not effective yet. In such circumstances, the question arises concerning the applicability of the restrictions imposed by the 2018 TRAC Rules to the arbitration agreements concluded at the time when the 2005 TRAC Rules were in effect. In answer to this question, it should be noted that Article 1.2 of the 2018 TRAC Rules provides that the parties to an arbitration agreement shall be presumed to have referred to the Rules in effect on the date of commencement of the arbitration, unless the parties have agreed to apply a particular version of the Rules. Therefore, insofar as the parties have not precisely referred to a previous version of the Rules, it is assumed that they have agreed on the application of the latest version and therefore, the provisions of that version have a retroactive effect. According to Professor Shaughnessy, “[t]he retroactive application of the rules can be justified by the concept of procedural efficiency.”[14]
The 2018 TRAC Rules, Article 5.2.d determines a six-month period since the date of the appointment of the sole arbitrator to render an award. The Centre, however, may extend such a deadline in exceptional circumstances. Comparable to the normal arbitration procedure, holding a hearing session is not obligatory, according to Article 5.2.c of the 2018 TRAC Rules, unless the parties request so, or the arbitrator decides that such session is required. As the last point on procedure, it is to be mentioned that the sole arbitrator has the discretion to state the reasons upon which the award is based in a summary form, unless the parties have agreed on the contrary by virtue of Article 5.2.e.
Enforcement and Setting Aside
Although all awards, whether national, international or foreign, are primarily enforceable under the Iranian arbitration regime, the enforcement procedure for different types of awards is not governed by a single act. National arbitration awards are subject to Section 7 of the Iranian Civil Procedure Code (‘the CPC’), while international arbitration awards are subject to the LICA. These two types of awards do not require recognition before their enforcement, as they are already issued according to the Iranian procedural laws. Foreign arbitral awards, i.e. arbitrations with seat outside of Iran, are enforceable under the provisions of the Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention) to which Iran is a member since 2001. However, before enforcement, they require to pass a recognition step.
The enforcement of an expedited arbitration award, rendered in any of the above types, i.e. national, international or foreign, is not expected to be challenging, because all basic requirements of a regular arbitration procedure are well regarded, though in a speedy manner: the parties shall have an agreement to arbitrate under the Rules of the Centre; they have the right to agree on the sole arbitrator and further, to challenge the appointed arbitrator; the sole arbitrator shall provide parties with fair and equal opportunities to present their cases and to be heard and eventually, the sole arbitrator shall render a final and binding award. Therefore, regardless of the type of the award, it should be enforceable under the respective law.
The element of speed is not unprecedented in the Iranian arbitration regime. Pursuant to Note under Article 484 of the CPC, the duration of an arbitration shall be three months, in case parties have agreed on specific person(s) as arbitrator(s). This deadline could be, of course, extended by a mutual agreement of the parties or through an authorization given by the parties to the arbitral tribunal to act at its discretion. A comparison between the expedited procedure under the 2018 TRAC Rules and this provision of the CPC demonstrates that the legitimacy of speedy arbitration proceedings, without violating the parties’ ample rights to be heard, is well accepted by the Iranian legislature.
Furthermore, it should be noted that although the enumerated grounds for setting aside of an arbitral award under the LICA and Section 7 of the CPC are not identical, these two sets of grounds are to a great extend similar in the sense that they mostly concern procedural grounds. Therefore, it is fair to conclude that the Iranian legislature’s approach towards the grounds for setting aside an arbitral award is in line with the view advocated by the UNCITRAL Model Law, Article 34. Since all basic and procedural requirements are well regarded under the expedited procedure, there is no serious ground for setting aside or refusal of the enforcement of an award rendered by this mechanism.
IV. Conclusion
As the last part of our article, Emergency Arbitration Expedited Procedure Tehran Regional Arbitration Center, we’d like to help you draw conclusions.
By adding emergency arbitration and expedited procedure mechanisms to its 2018 Rules of Arbitration, TRAC took the initial steps towards introducing innovative features to the Iranian arbitration regime. While the degree of these mechanisms being welcomed in practice is entirely based on the users’ choice, questions are expected to be raised, not only as to the procedure and conduct of the mechanisms, but also regarding the setting aside and enforcement of the awards rendered under these two procedures.
While there exists a possibility that the application of an emergency arbitration or expedited procedure leads to certain changes in terms of the parties’ agreement to arbitration, e.g. a sole arbitrator is appointed instead of a panel of three arbitrators in the expedited procedure, in the authors’ viewpoint, this is not in conflict with the principle of party autonomy.
The very reason is, by inserting TRAC arbitration clause to a contract, the parties have already made an overriding agreement, which includes, inter alia, the innovative features at hand. Also, the retroactive application of these mechanisms should not be a matter of controversy, since the parties shall be presumed to have referred to the Rules in effect on the date of the commencement of the arbitration, unless agreed otherwise, according to the provision envisaged under Article 1.2 of the 2018 TRAC Rules.
There exists no serious concern regarding the setting aside and enforcement of an arbitral award rendered according to an expedited procedure, as all basic requirements of a regular arbitration procedure are well regarded, and the parties are provided with ample opportunities to present their positions, though in a timely manner. Nothing, therefore, should prevent the enforcement of such an award.
There remain, however, open questions as to the enforceability of the decision of an emergency arbitrator, either in the form of an order or an award. Non-finality of the decision rendered by an emergency arbitrator, as well as its issuance before the constitution of the tribunal are the two grounds that might question the enforceability of such decisions. Since at the time of writing this article, no request of emergency arbitration is filed by the Centre yet, the way that Iranian courts might deal with the issue is a matter to be observed in the future.
In the authors’ viewpoint, while expedited procedure is expected to be welcomed by the parties to both domestic and international arbitrations, emergency arbitration procedure will be mostly requested in international cases, as parties to domestic arbitrations would still prefer to have recourse to State courts for obtaining an interim measure before the constitution of the tribunal due to the enforcement considerations as well as compatibility of such a request with the national laws and the TRAC Rules.
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[1] Dedicated to Professor Shaughnessy who has made further exploration in the field of international commercial arbitration law for many of us possible.
[2] Alumnus 2009, Director, Tehran Regional Arbitration Centre, email address: director@trac.ir.
[3] Alumnus 2011, Project Manager, Tehran Regional Arbitration Centre, email address: mh.tavana@trac.ir.
The views expressed here are entirely for the authors and are not from the viewpoint of TRAC.
[4] Originally known as the Asian Legal Consultative Committee, this international organization was constituted in November 1956. It is considered to be a tangible outcome of the Bandung Conference, held in Indonesia, in April 1955. Seven Asian States, namely Burma (now Myanmar), Ceylon (now Sri Lanka), India, Indonesia, Iraq, Japan, and the United Arab Republic (now Arab Republic of Egypt and Syrian Arab Republic) were the original Member States.
In April 1958, in order to include participation of countries of the continent of Africa, its name was changed to Asian-African Legal Consultative Committee. At the 40th Session, held in New Delhi, in 2001, the name of the Committee was changed to Asian-African Legal Consultative Organization.
[5] Eric A. Schwartz, Comments, ICC Special Supplement 1997: The New 1998 ICC Rules of Arbitration: Proceedings of the ICC Conference Presenting the Rules (1997), http://library.iccwbo.org/content/dr/SUPPLEMENTS/SUPP_0001_COMMENT6.htm?l1=Supplements&l2=The+New+1998+ICC+Rules+of+Arbitration&AUTH=a66a3585-b022-4f6c-936a-2c93b8a70f97&Timeframe=jsLsLbqe9mdqKV5IzxxuLvnJnxfYV/zp7fa019DdB78/h6ebGFh7Q== (accessed 1 Mar. 2019).
[6] The first proceeding was initiated in 2001 and the first series of decisions rendered in October and November 2001. See Emmanuel Gaillard & Philippe Pinsolle, The ICC Pre-Arbitral Referee: First Practical Experiences, 20 Arb. Int’l. 13, 13 (No. 1, 2004).
[7] Patricia Shaughnessy, Pre-arbitral Urgent Relief: The New SCC Emergency Arbitrator Rules, 27 J. Int’l. Arb. 337, 350 (No. 4, 2010).
[8] See Emmanuel Gaillard, First Court Decision on Pre-Arbitral Referee, 229 N.Y.L.J. (No. 107, 2003), https://www.shearman.com/~/media/Files/NewsInsights/Publications/2003/06/First-Court-Decision-on-PreArbitral-Referee/Files/Download-PDF-First-Court-Decision-on-PreArbitral__/FileAttachment/IA_060503.pdf (accessed 1 Mar. 2019).
[9] J. G. Merrills, Interim Measures of Protection in the Recent Jurisprudence of the International Court of Justice, 44 ICLQ 90, 114 (No. 1, 1995).
[10] Patricia Shaughnessy, supra note 6, at 345.
[11] See e.g. Benjamin J.C. Wolf, On-line But Out of Touch: Analyzing International Dispute Resolution Through the
Lens of the Internet, 14 Cardozo J. Int’l. Comp. L. 281, 306 (2006) (describing the disadvantages of arbitration, including costs similar to litigation and lengthy discovery process and hearings).
[12] Patricia Shaughnessy, supra note 6, at 357.
[13] See e.g. John Wilkinson, The Future of Arbitration: Striking a Balance Between Quick Justice and Fair Resolution of Complex Claims, 8 BNA Exp. Evid. Rep. 189 (2008); See also, Elena V. Helmer, International Commercial Arbitration: Americanized, “Civilized,” or Harmonized?, 19 Ohio St. J. Disp. Res. 35 (2003) (discussing perceptions of the American influence on international arbitration)
Amir A. Shalakany, Arbitration and the Third Work: A Plea for Reassessing Bias Under the Specter of Neoliberalism, 41 Harv. Int’l. L.J. 419, 434 (2000) (observing that international arbitration is no longer quicker than adjudication; suggesting that ‘American law model’ is a cause).
[14] Patricia Shaughnessy, supra note 6, at 353 (discussing the issue of retroactive effect of institutional rules).
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