Young ICCA Skills Training Workshop: Emergency Arbitrators and Interim Measures in International Arbitration
Post Event Report
On an unusually sunny Friday morning in Bogotá, 2,600 metres nearer to the stars; Baker Mackenzie’s Office hosted the Young ICCA’s Skills Training Workshop on Interim Measures and Emergency Arbitrators in International Arbitration. The auditorium was full with young lawyers who met with experienced practitioners from Colombia and Ecuador. They shared their insights into the latest trends and outstanding issues surrounding the use of interim measures and emergency arbitrators both in International Commercial Arbitration and International Investment Arbitration.
Eduardo Zuleta, from Zuleta Abogados (Bogotá), presented the introductory remarks, stating the importance of analyzing interim measures in a practical way, rather than maintaining those discussions just in the theory. Mr. Zuleta emphasized on how arbitrators cannot forget the practical impacts of those decisions, both in commercial and investment aArbitration Proceedings. Issuing interim Measures needs a series of considerations regarding its nature and enforceability, but the affected industry must be taken on account as well, as it can be seen in construction cases or in a merge and acquisitions sale of shares. A good decision on the issuance of an interim measure takes on account both the requirements that have been developed regarding the topic, and the possible impacts of the ruling to the involved industry, as well. The evolution of arbitration led to the establishment of clear requirements regarding the topic, which are prima facie jurisdiction of the Tribunal, a right susceptible of protection, and a necessary, urgent and proportional measure. Although some of those requirements are subjective, the discussion cannot be kept on a bubble. A good decision on interim measures requires knowledge of the facts, the applicable law and the industry, on a case-by-case basis.
Mr. Zuleta's introduction to this cutting-edge topic was followed by the panel "Interim Measures in International Arbitration", moderated by Jorge Valencia, Associate at Baker McKenzie (Bogotá). The panel was composed by Claudia Benavides Galvis, partner at Baker McKenzie (Bogotá), Javier Jaramillo, Associate at Pérez Bustamente & Ponce (Quito), and María Camila Rincón Escobar, from the Agencia Nacional de Defensa Jurídica del Estado (the National Agency for the Judicial Defense of the State).
Mr. Valencia started the panel with a question regarding the issues and challenges faced by arbitrators in investment arbitration when granting an interim Measure. Ms. Rincón stated that investment arbitration does not have general rules for the topic, and the interim Measures requested can go as far as asking for the arbitral tribunal to stop extradition proceedings, as in the ICSID case Hydro S.r.l. and others v. Albania. An additional challenge that arbitrators in investment arbitration proceedings may face relates with enforceability and non-compliance of those measures, since it could be difficult to enforce an interim measure in the hosting State, as in Chevron v. Ecuador. The next question to be answered relates with the possible consequences of non-compliance. Even though the ICSID Convention does not provide for an specific consequence, case law does. Non-compliance is dealt with adverse inferences or with the issuance of an order related with the costs bearded by the other party, the latter being the most common one, since adverse inferences can lead to the challenge of the award and are only useful on the cases in which the measure is related with evidence.
Mr. Jaramillo intervened to state on how non-compliance might be a violation of independence and impartiality, since the defense of an State is held by the executive power but interim measures are enforced by the judiciary. He wondered about the possibility that the executive power has to stop the judiciary power from issuing an interim measures, if any. It also can lead to the international responsibility of the State, and Ms. Rincón supported that idea insisting on how decisions in investment arbitration deal with problems of sovereignty, and since the State is responsible as a whole, it is important (indeed, it is the challenge inherent to investment arbitration) to coordinate the State, to interpret the internal law in accordance with the international obligations of an State.
In relation with the theory behind the requirements needed for the grant of an interim measure, Mr. Jaramillo observed that commercial arbitration and investment arbitration share mostly the same requirements, namely: the appearance of a good right; a need to protect the interest of a procedure; and urgency, the most important one. interim measures must not be seen as a punishment, but as a way to protect the status quo, taking on account that, if an iInterim measure is not granted, then the damages to the party would be even bigger. Ms. Benavides commented on the need for the final decision to be enforceable, since the parties want an effective award, and remarked the necessity that the parties have to demonstrate that they have an urgent need to protect something that might be decided in a year, maybe a year and a half.
Ms. Rincón's final thoughts revolved around the necessity to prove that the interim measures must be granted to avoid the reparation of an irreparable harm, which has been taken as any damage that cannot be compensated with money.
On the question on how to overcome issues of enforceability, Mr. Valencia asked Ms. Benavides how the Colombian system works after Law 1563 of 2012. Ms. Benavides described how Colombian Courts enforce interim measures granted by arbitrators without the need to go to the recognition procedure established by Colombian legal system. She also mentioned that the judicial system supports the arbitral system.
When asked about the Ecuadorian legal system, Mr. Jaramillo explained that the arbitral legislation in Ecuador is very effective, since article 9 of Ecuadorian Arbitration and Mediation Law provides that if the parties give the arbitra tribunal the power to issue an Interim Measure, then arbitrators can do it without going to the court, and it the practice, this provision usually works really good, since people think that arbitrators and judges are the same.
Mr. Valencia asked about the possibility to enforce investment arbitration interim measures through Law 1563, to which Ms. Rincón answered that, since the applicable law in investment procedures is the international law and their nature is very different, there is no way to do so.
Then, the discussion revolved around the role of public policy and interim measures, and Ms. Benavides stated that there are very specific cases in which a judge can deny to enforce an interim measure. One of those cases is when the judge is requested to enforce an interim measure contrary to the public order.
Regarding the topic of indemnity, Ms. Benavides stated that the type of interim Mmeasure determines the way to secure potential damages. If the requested measure involves the commercialization of products, for example, potential damages can be easily secured with money, but the loss caused by other types of interim measures is harder to calculate.
Mr. Jaramillo concluded the panel with his views on the interim measures in investment srbitration, stating that although an arbitral tribunal cannot order a third party to comply with an interim measure, the arbitrators definitely have to think about the consequences that their decisions have on third parties. Additionally, it must be taken on account that under the ICSID Convention, arbitrators can only "recommend" provisional measures to preserve the rights of the parties, which raises the question about its enforceability. However, for Ms. Rincón, under case law either there is no real distinction between "recommend" and "order", as it was shown on the case Maffezini v. Spain, or it is understood that the Arbitrators have the power to issue interim Measures under the theory of inherent powers.
This first panel was highly interactive, and it encouraged the participants to ask relevant questions regarding the issuance of interim measures and the time requirements, if any, to request them, in relation with the need for urgency. Some of the most experienced participants even shared their own experience and thoughts on the subject.
The second panel, moderated by Lukas Montoya from Lévy Kaufmann-Kohler (Geneva) and composed by Estefanía Ponce Durán, from Zuleta Abogados (Bogotá), and Daniela Corchuelo from Posse Herrera Ruiz (Bogotá), engaged on the issue of emergency arbitrators in International Arbitration.
Ms. Ponce provided a context to the discussion by explaining what is emergency arbitration and what are emergency measures. She clarified that the use of emergency arbitration should not preclude the parties from going to courts when necessary, given that there are still shortcomings involved with the use of emergency arbitrators (i.e.: their effect vis-à-vis third parties, or the limited array of measures available to the emergency arbitrator compared to a judge). Ms. Ponce also commented on how the UNCITRAL Model Law has suffered a backlog on the issue when compared on how emergency arbitration is regulated by arbitral institutions around the world. She concluded her intervention analyzing the latest decisions regarding the use of emergency arbitrators in the United States, Ukraine and Chile which show that there is a long way to a unified approach to emergency arbitrators.
In turn, Ms. Corchuelo focused on practical implications of recurring to emergency arbitration in Colombia. She began by pointing that, in her opinion, the enforcement of emergency measures should not be a problem under Colombian Law as the duty for Colombian judges to enforce interim measures did not distinguish between those adopted by the emergency arbitrator or a tribunal. Then she moved into how economic considerations should guide the decision of resorting to emergency arbitration instead of requesting interim measures to Colombian judges. While the costs of recurring to emergency arbitration may be prohibitive for plaintiffs with small claims when requested to arbitral institutions such as the ICC, this element should be pondered with the security for costs that Colombian Law establishes when requesting interim measures before Colombian courts, which may result in a more expensive avenue for bigger claims.
After a round of questions by Mr. Montoya and the public, Mr. Morantz, on behalf of Young ICCA, provided closing remarks to the workshop not only by thanking the participants for the fruitful discussion, but also sharing with assistants the benefits of joining Young ICCA, such as the possibility to engage in unique mentoring opportunities, postulate to exceptional scholarships to top international arbitration Masters’ programs and being able to participate in the Young ICCA arbitration blog. Overall, the workshop was a perfect example of how being able to participate in these events not only contributes to the construction of shared knowledge on international arbitration, but also as a showcase of the capabilities of young lawyers.
A succulent light lunch that Baker McKenzie kindly offered closed the workshop, providing a great close to the week and the setting for a more casual interaction between participants.
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