Emergency Arbitration Proceedings and How They Relate to Construction Disputes
Construction and Procurement Law News, Q1 2023
A recent win by a team of Bradley construction attorneys highlighted the role emergency arbitration proceedings can play in a dispute subject to an arbitration agreement. The ongoing case involves the design and construction of a large international energy project, which is currently in arbitration before the International Chamber of Commerce (“ICC”).
While many parties are aware that they may be bound to arbitrate disputes in lieu of litigation in state or federal court, not everyone is aware of the various forms those arbitral proceedings may take or the different purposes that can be served through such proceedings.
In some cases, the nature of a dispute requires immediate action to avoid irreparable harm. In traditional litigation, a party might seek a temporary restraining order or a preliminary injunction from a court to prevent another party from taking certain action. Similar remedies are often available to parties who have agreed to arbitrate their disputes via (1) emergency arbitration procedures before the appointment of an arbitrator and (2) via a request for interim measures after the appointment of an arbitrator.
In the United States, many construction disputes are resolved under the American Arbitration Association’s (“AAA”) Construction Industry Rules for Arbitration. Rule R-39 under the AAA Rules permits a party to seek “emergency relief prior to the constitution of the panel.” In such a case, the AAA must appoint a single emergency arbitrator who will then set an expedited schedule for consideration of the application for emergency relief. The emergency arbitrator will issue an interim order or award granting the requested relief if the arbitrator finds that “the party seeking the emergency relief has shown that immediate and irreparable loss or damage shall result in the absence of emergency relief.” Any request to modify an interim award must be based on “changed circumstances” and directed to the emergency arbitrator until the arbitration panel is constituted, after which time, such a request must be made to the arbitrator.
Rule R-38 similarly provides for the imposition of interim measures, including “injunctive relief and measures for the protection or conservation of property and disposition of perishable goods” after the arbitration panel has been appointed.
On large international projects, it is common to see arbitration agreements that select the ICC as the administering body of an arbitrable international dispute. Article 29 and Appendix V to the ICC Arbitration Rules in effect as of January 1, 2021 also provide for the appointment of an emergency arbitrator to decide issues of “interim or conservatory measures that cannot await the constitution of an arbitral tribunal.” And Article 28 of the ICC Rules permits a party to also seek interim or conservatory measures once the arbitral tribunal has been constituted.
In cases before both the AAA and ICC, no party is precluded from also pursuing interim measures from a court and such actions do not necessarily constitute a waiver of the agreement to arbitrate. Under certain circumstances, the aggrieved party is within its rights to pursue both interim measures in arbitration and injunctive relief before a court.
Parties should consider the utility of emergency or interim arbitration proceedings and should be mindful that, in many cases, an agreement to arbitrate does not foreclose traditional remedies available in situations where irreparable harm is imminent. In short, when facing immediate events resulting in potential harm, one should closely examine all available avenues for relief and seek legal guidance as to the best path forward.