THE USE OF EMERGENCY ARBITRATOR PROCEDURE IN INVESTMENT TREATY ARBITRATION : COUNTERWEIGHT TO STATES’ REGULATORY POWERS OR UNEVEN HEAD-START FOR INVESTORS?

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THE USE OF EMERGENCY ARBITRATOR

PROCEDURE IN INVESTMENT TREATY

ARBITRATION

COUNTERWEIGHT TO STATES’ REGULATORY POWERS OR

UNEVEN HEAD-START FOR INVESTORS?

Master Thesis 2016-2017

International and European Law:

International Trade and Investment Law (LLM track)

Student: Vasileios Chatzipavlou

Student Number: 11298855

Supervisor: Prof. Stephan Schill

Date of submission: 28

th

_{July 2017}

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Abstract

The Emergency Arbitrator procedure, a ‘product’ of international commercial arbitration, has been recently ‘tested’ in the realm of investment treaty arbitration, providing foreign investors with the swiftest and earliest type of interim protection available. Although still in ‘experimental phase’, the use of the Emergency Arbitrator procedure in investment treaty arbitration already raises questions about its appropriateness for settling investor-State disputes. Unlike private parties in commercial arbitration, States respondents in investment arbitration need more time to respond while their regulatory space needs to be respected. Besides presenting the state-of-the-art of emergency proceedings in investment arbitration, this paper examines whether the speed and the early stage at which the Emergency Arbitrator occurs allows States to present their case and be treated equally to investors and whether emergency relief interferes unduly with States’ regulatory powers. Thus, the two questions this paper addresses are linked to the sovereign nature of the respondent and regard due process and State sovereignty: Can the Emergency Arbitrator procedure guarantee procedural fairness or does it offer an unfair head-start to investors? Does emergency relief infringe States’ sovereignty or does it provide a counterweight to States’ regulatory powers?

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A. List of Abbreviations

BIT Bilateral Investment Treaty

CIETAC China International Economic and Trade Arbitration Commission

EA Emergency Arbitrator

HIAC Hong-Kong International Arbitration Centre ICC International Chamber of Commerce

ICDR International Centre for Dispute Resolution

ICSID International Centre for Settlement of Investment Disputes IIA International Investment Agreement

LCIA London Centre of International Arbitration NAI Netherlands Arbitration Institute

NYC New York Convention

SCC Stockholm Chamber of Commerce

SIAC IA Singapore International Arbitration Centre Investment Arbitration UNCITRAL United Nations Commission on International Trade Law

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B. Introduction

It is true that ‘investment treaty arbitration relies, to a significant extent, upon the procedural framework developed for commercial arbitration’1_{, adopting procedural} mechanisms, initially designed for commercial disputes, and adapting them to the special features and needs of investor-State disputes.

One of these mechanisms quite recently adopted from the realm of commercial arbitration, although with limited application so far in investment treaty arbitration, has been the use of Emergency Arbitrator (EA) procedure. Since 2010, when it was first introduced under various arbitration rules, it has been widely used in international commercial arbitration, for which it was originally designed.

However, in 2014 it was for the first time used for an investment dispute under an international investment treaty. Since then, there have been six known cases where this kind of procedure has been used in the context of investment treaty arbitration, all under the same arbitration rules, i.e. the Stockholm Chamber of Commerce Rules (SCC rules). Although emergency arbitrator procedure is available under many institutional arbitration rules (ICC, LCIA, SCC, HKIAC, SIAC, ICDR, CIETAC) for commercial disputes, only under two set of rules are they available for investment disputes, namely the SCC rules and the SIAC rules.

The purpose of having an emergency arbitrator is for a party to obtain swift interim protection when facing the risk of suffering irreparable harm before even the tribunal has been constituted. The main characteristics of the EA procedure are thus, its speed and its precocity, i.e. the early stage at which it applies. It is precisely because of these two characteristics that the EA procedure is considered such a unique and advantageous mechanism for a party to gain interim protection, albeit subject to certain conditions2. Before the introduction of emergency arbitrator provisions, the only option a party had was the domestic courts, either of the seat or of the host State in case of investment

1_{Zachary Douglas, ‘The Plea of Illegality in Investment Treaty Arbitration’, (2014) ICSID Review 29}

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2_{The conditions to be met so that an EA can grant emergency relief include, inter alia, prima facie case,}

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arbitration3_{. Nevertheless, seeking urgent interim relief before the courts of the host} State, is not an appealing option for foreign investors, mostly because of concerns of bias, confidentiality, time and costs4.

In cases where the aggrieved party cannot await the constitution of the tribunal and national courts do not appear as an optimal solution, the EA procedure constitutes the most effective procedural mechanism for interim relief. This holds true especially in investment arbitration, because the constitution of an investment arbitral tribunal is a very lengthy procedure. The commonest reason for a delay in granting provisional relief, in the ICSID context, is the constitution of the tribunal, which will usually take more than 90 days and sometimes more than a year5. In the meantime, the only effective way for a party to secure its rights from irreparable and imminent harm, apart from domestic courts, is through urgent interim relief. As it has been very accurately said ‘Investment arbitration is, indeed, not for the impatient!’6_.

In an ICSID arbitration, which does not include provisions for emergency procedure, the only option for quick interim relief is provided for by article 39 of the ICSID Arbitration Rules7. This article, while it permits a party to request provisional relief before the constitution of the tribunal, it allows the granting of such relief only after the constitution of the tribunal. Thus, although the request for urgent relief has been

3_{Sarah Vasani, ‘The Emergency Arbitrator—An Effective Option for Urgent Relief’, (2015) 17 Young}

Arb Rev 4, 5: ‘Prior to the advent of emergency arbitrator procedures, parties had no other option but to seek urgent interim relief from national courts’.

4_{Ibid: ‘Indeed, there are a number of reasons why a party may not wish to seek interim relief from}

national courts…Court proceedings are not confidential, and they are often lengthy and costly. There is also often a concern (either perceived or real) that certain national courts may be biased towards their own nationals…’;

5_{Karl P. Sauvant, Yearbook on International Investment Law and Policy 2009-2010, (OUP 2010), 248} 6_{Koh Swee Yen, ‘The Use of Emergency Arbitrators in Investment Treaty Arbitration’, (2016) ICSID}

Review 31 (3), 534-538, 534 citing Adam Raviv, ‘Achieving a Faster ICSID’ (2014) 1 Transnational

Dispute Management

www.wilmerhale.com/uploadedFiles/WilmerHale_Shared_Content/Files/PDFs/achieving-a-faster-ICSID.pdf accessed 13/06/2017

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expedited, the requesting party has still to wait for the constitution of the tribunal8 unless it prefers to resort to the national courts of the host State9_{. Neither do the} UNCITRAL Rules contain similar provisions. As for the ICC rules, although they contain emergency arbitrator provisions, they do not apply to investment treaty arbitration by virtue of the signatory requirement set in article 29(5) ICC Rules10. The EA procedure, albeit initially designed for commercial disputes, has made its way in the field of investment arbitration providing an investor with the swiftest and earliest type of interim protection available. Although it can only be considered as a positive development from the investors’ perspective, the introduction of the EA procedure in investment arbitration has raised concerns regarding its appropriateness for settling investor-State disputes. Especially from a State’s point of view, this procedural innovation seems to be rather problematic11.

It has been argued that this procedural mechanism is not suitable for investment arbitration because of ‘the unique features of the latter’12_{. Indeed, commercial and} investment arbitration, despite their common ground, they constitute different procedures and involve different type of parties. The very core difference between commercial and investment arbitration lies precisely on the different - i.e. sovereign - nature of the respondent. Contrary to commercial disputes, where both private parties are equals, the parties in investment arbitration find themselves in an asymmetry. This asymmetry is translated in two ways: firstly, a host State as respondent possesses a power that an investor does not, i.e. the power to regulate, and secondly, a foreign

8_{Karl P. Sauvant (n 5), 249: ‘the process of securing provisional measures is expedited but marginally’.} 9_{Article 39(6) ICSID Arbitration Rules: “Nothing in this Rule shall prevent the parties, provided that}

they have so stipulated in the agreement recording their consent, from requesting any judicial or other authority to order provisional measures, prior to or after the institution of the proceeding, for the preservation of their respective rights and interests”.

10_{Koh Swee Yen (n 6), pp. 535: The signatory requirement in article 29(5) ICC Rules (“...the Emergency}

Arbitrator rules…shall apply only to parties that are either signatories of the arbitration agreement under the Rules that is relied upon for the application or successors to such signatories”) excludes their application in treaty-based investment disputes.

11_{Joel Dahlquist, ‘The First Known Investment Treaty Emergency Arbitration’, (2016) The journal of}

world investment & trade, 17, 261-271, 270

12_{Maxim Osadchiy, ‘Emergency Relief in Investment Treaty Arbitration: A Word of Caution’, (2017)}

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investor as claimant is the only party entitled to initiate arbitral proceedings and thus, request emergency interim relief.

Consequently, respondent States could argue that the EA procedure is beneficial only to the investor, by providing him with a significant procedural head-start, while putting the sovereign respondent in the difficult position to ‘defend its interests in such a swift manner that is likely to be less suited to, than most commercial actors’13. Due to its speed and particularly the very short timeframes, within which States can respond, the EA procedure, as Joel Dahlquist observes, ‘raises some fundamental questions of procedural fairness’14, for example: ‘Are both parties in the arbitration treated equally?’ and ‘Are they both given the opportunity to be heard and present their case?’. On the other hand, arguing from an investor’s perspective, the asymmetry describing investment treaty arbitration could explain the rationale behind this uneven head-start, while the duty for procedural efficiency bearing upon an arbitrator, could compensate any failure to fulfill his duty for procedural fairness.

Apart from due process concerns15, the EA procedure raises also another important issue, not related to procedure but rather to substance, namely the question whether emergency interim relief, when granted, infringes a host State’s sovereign power to regulate. This question is raised since emergency interim relief, like any kind of interim relief, has a non-pecuniary nature aiming at preserving the status quo, i.e. preventing imminent and irreparable harm of the investor’s rights from the host State’s regulatory measures. Therefore, an EA decision would usually take the form of an injunction, obliging a State to refrain from applying its laws or regulations. Given the traditional reluctance of tribunals to order non-pecuniary remedies, out of concern to interfere unduly with measures of public policy inherent in States’ sovereign powers, emergency relief raises public policy concerns16. However, the specific traits of emergency relief,

13_{Joel Dahlquist, ‘Emergency Arbitrators in Investment Treaty Disputes’, (Kluwer Arbitration Blog, 10}

March 2015) < http://kluwerarbitrationblog.com/2015/03/10/emergency-arbitrators-in-investment-treaty-disputes/> accessed 13/06/2017

14_Ibid

15_{Here the terms ‘due process’ and ‘procedural fairness’ are used interchangeably.}

16_{Maxim Osadchiy (n 12), 249: ‘The approach of emergency arbitrators in these cases is difficult to}

reconcile with previous decisions of investment tribunals which, as mentioned, have been very careful when dealing with requests to order non-monetary relief against states’; The EA procedure raises also

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i.e. the pre-defined, short expiration date and the investor-specific scope, as well as its conditional17_{application, can arguably speak against any such concerns.}

The above described considerations of due process and State sovereignty, both linked to the nature of a sovereign respondent, are the focus of this paper which aims at answering the question whether the EA procedure is an appropriate mechanism for investment arbitration, whose unique feature is the sovereign nature of the respondent. The object of the paper is to evaluate the appropriateness of EA procedure in the context of investor-State disputes both in terms of procedure and substance, by assessing the compatibility of the emergency procedure itself with the principle of due process and the emergency relief with the principle of State sovereignty.

The main research question translates thus, into the following two sub-questions: 1) Can the speed and short time frames of the EA procedure guarantee that

States have a reasonable and realistic opportunity to defend themselves and thus, be treated equally to investors?

2) Does emergency relief interfere unduly with States’ sovereign right to regulate, occurring at a pre-arbitral stage, or does it offer a counterweight to States’ regulatory powers?

In order to answer these questions, the paper firstly presents the state-of-the-art by looking at the recent, albeit limited, case law and rules under which the EA procedure can be and has been applied. The paper continues by presenting the theoretical framework of the principle of due process, as established in international arbitration, and analyzing whether the EA procedure, as it is designed, can guarantee equal treatment of the parties; particularly, whether States, given the difficulties they face when preparing their defense, have an actual opportunity to respond within the tight deadlines of the EA procedure or whether the investors’ need for efficient, timely relief outweighs any lack of due process. In the same spirit, the paper presents the theoretical framework of the States’ sovereign right to regulate and its potential conflict with

other issues, like cooling-off periods, state consent to EA, enforceability of EA’s awards etc. which for limited purposes cannot be assessed here and thus, are not covered by the scope of this paper.

17_{Meaning the conditions or standards which need to be fulfilled for emergency relief to be granted, see}

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pecuniary remedies, in general, but also examines whether emergency relief, given its duration, conditions and scope of application, interferes with States’ regulatory measures to such an extent that it impinges on its sovereignty.

C. Chapter I - State-of-the-art

1. Emergency Rules for Investment Disputes

As stated above, only under the SCC Rules and the SIAC Rules is the emergency relief procedure available to foreign investors when initiating arbitral proceedings against their host State.

The SCC Rules do not refer explicitly to the question of the applicability of emergency arbitrator (EA) provisions in the context of investment treaty arbitration and thus, they should, at least on their face, be equally available in a treaty-based arbitration as in a contract-based arbitration18.

Conversely, the new SIAC Rules (SIAC IA 2017 Rules) refer explicitly to the availability of emergency arbitrator procedure in investment arbitration based either on a contract or a treaty, provided that the disputing parties have consented to it19. The new SIAC Rules, contrary to the ICC and SCC Rules which refer only in their appendixes to investment disputes, are a separate and specialized set of procedures, specifically designed by the Singapore International Arbitration Centre for investment disputes20. The SCC emergency arbitrator procedure is impressively and maybe disconcertingly swift. It provides for an appointment of an emergency arbitrator by the SCC Board within 24 hours of receipt of the application21 and for an issuance of an emergency decision no later than 5 days from the date the application was referred to the emergency

18_{Joel Dahlquist, (n 13)}

19_{SIAC IA Rules article 27.4: ‘If the parties expressly agree on the application of the Emergency}

Arbitrator provisions…a party in need of emergency interim relief prior to the constitution of the tribunal may apply for such relief’.

20_{SIAC IA Rules Introduction (i): ‘a specialized set of procedures…to be applied by agreement in}

disputes involving a state…whether arising out of a contract, treaty, statute or other instrument’.

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arbitrator22_{. Moreover, the EA SCC Rules apply by default, which means that unless} the parties opt-out of the EA provisions, they will apply automatically.

In contrast, the new SIAC IA Rules provide for a relatively fairer and more

time-reasonable EA procedure. The appointment of the EA is also made within a day of

receipt of the application but the issuance of a decision is to be made within 14 days from the date of his appointment23. Furthermore, the application for emergency relief must be filed either following or concurrent with a filing of a notice of Arbitration, whereas in EA SCC Rules there is not such an express requirement24. The EA provisions also require express agreement of the parties in order to apply to the arbitration, contrary to the opt-out mechanism of the SCC Rules25.

2. Emergency Investment Cases

So far, no emergency arbitral proceedings have been initiated under the SIAC IA Rules while all six known cases, where the EA procedure was invoked in investment treaty disputes, were held under the SCC Rules. These cases were: TSIKInvest LLC v Moldova and Griffin Group v Poland in 2014, JKX Oil and Gas and others v Ukraine in 2015,

Evrobalt LLC v Moldova and Kompozit LLC v Moldova in 2016 and Puma Energy Holdings (Luxembourg) SARL v the Republic of Benin in 2017. The seemingly small

number of cases is of no surprise, as Koh Swee Yen points out in his article, given that the amended SCC Rules, providing for the EA procedure, were issued in 2010 and that arbitration under the SCC Rules is available only under 60 bilateral Investment Treaties (BITs) and the Energy Charter Treaty (ECT) 26.

What all these six cases have in common is that they were all held under the SCC Rules, which provide for very strict time limits within which the EA procedure is to be

22_{Article 8(1) Appendix II SCC Rules} 23_{Schedule 1 para 3 and 9 SIAC IA Rules} 24_{Schedule 1 para 1 SIAC IA Rules}

25_{ibid: ‘If the parties have expressly agreed on the application of the emergency arbitrator provisions’.} 26_{Koh Swee Yen (n 6), 535}

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completed27_{. Therefore, in all cases the decision of the EA was rendered in an extremely} short time period, namely less than or within a week after the request for an EA was made by the claimants.

In all cases the respondent was notified shortly – within two days – after the request was received by the SCC 28. Three out of six cases involved Moldova as a respondent State and all three of them shared closely related factual and legal bases, although they did not share similar outcomes. Only the awards form the Moldova cases were published. In the three Moldova cases (TSIK, Evrobalt and Kompozit) the claimants claimed expropriation of their shareholding rights in Moldovan banks by acts taken by the central bank of Moldova, i.e. the National Bank of Moldova (NBM), and other Moldovan authorities. The allegedly illegal acts by Moldova were decisions which suspended the claimants’ voting rights and ordered them to divest their shares within 3 months, otherwise the shares would be cancelled. In neither of the Moldova cases did Moldova participated in the EA proceedings.

The TSIKinvest LLC v The Republic of Moldova case was the first known investment treaty emergency arbitration29. The EA granted interim relief to the claimant by staying the NBM’s decision on the suspension and divestiture of the shareholding rights of TSIKInvest LLC. Conversely, in the Evrobalt LLC v Moldova case the EA refused to grant interim relief whereas in the Kompozit LLC v Moldova case, which involved a similarly-situated Russian shareholder in the same Moldovan bank, the EA granted partially the relief sought by ordering Moldova to refrain from cancelling the claimant’s shares but not from suspending his voting rights.

After finding prima facie jurisdiction, by examining whether there was an investor holding an investment as defined under the relevant applicable BIT, all three EAs relied

27_{Article 8(1) Appendix II SCC Rules: ‘Any emergency decision on interim measures shall be made not}

later than 5 days from the date upon which the application was referred to the Emergency Arbitrator pursuant to Article 6 of this Appendix. The Board may extend this time limit upon a reasoned request from the Emergency Arbitrator, or if otherwise deemed necessary’.

28_{Article 3 Appendix II SCC Rules: ‘As soon as an application for the appointment of an Emergency}

Arbitrator has been received, the Secretariat shall send the application to the other party’.

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on the following main criteria: a) prima facie case on the merits30_{, b) urgency}31_{and c)} irreparable harm32_{or significant/substantial prejudice}33_{, while adding a proportionality} test in their analysis as a fourth criterion, by weighing the investor’s harm if emergency relief is not granted with the State’s harm if emergency relief is granted34_{. The reason}

for applying the same criteria was that all EAs referred to articles 17-17A and 26 of the UNCITRAL Model Law as guiding source which codified the requirements to be satisfied in order to issue interim measures, since article 32 of the SCC Rules on interim measures did not specify these requirements35. Quite remarkably, the fact that all three EAs arrived at divergent conclusions, although relying basically on the same criteria, shows that emergency rules give a wide discretion to EAs when deciding whether to grant emergency relief.

30_{TSIKinvest LLC v. Republic of Moldova, SCC EA Case No. EA 2014/053 para 62: “It is generally}

accepted that, for interim measures to be granted, the requesting party must satisfy the arbitral tribunal that there is a reasonable possibility that it will succeed on the merits of the claim”.

Kompozit LLC v Republic of Moldova, SCC EA Case No. 2016/095 para 73: “This standard is

contemplated in article 17A(1)(a) of the Model Law which provides that the arbitrator has to be satisfied that there is a reasonable possibility that the requesting party will succeed on the merits of the claim”.

31_{Kompozit LLC v Moldova para 68: “To comply with the urgency test it should be established prima}

facie that an imminent harm might be caused to the applicant if the requested interim measure is not granted by the emergency arbitrator before such measure can be obtained from the arbitral tribunal”.

32_{TSIKinvest LLC v Moldova para 56: “…which will result in irreparable harm to claimant, as it will be}

permanently deprived of its rights as a shareholder of the bank, which will be irrevocable even if decision 19 is eventually found to be flawed”.

The EA in Evrobalt LLC v. The Republic of Moldova, SCC EA Case No. 2016/082 refused to grant interim relief by relying on the stricter standard of irreparable harm: “The question here is whether the harm…is or is not adequately reparable by an award of damages” (para 51). Since he found that the harm “is purely economic in its nature and confined in its scope” (para 48), it can thus, “be made good by an award of damages” (para 52).

33_{Applying this more flexible standard than that of irreparable harm, the EA concluded in Kompozit LLC}

v Moldova para 88 that “…even if the claimants may receive certain compensation at the time of the sale

of the shares…this compensation will not necessarily reflect the real value of the shares”.

34_{TSIKinvest LLC v Moldova para 65: “By comparison, the potential harm that might be caused to}

respondent by granting the requested interim relief ought to be limited”.

35_{Evrobalt LLC v Moldova para 32-33: “Article 32 affords a power to issue interim measures in broad}

terms…By contrast article 32 does not spell out the requirements that must be satisfied…Articles 17-17A of the UNCITRAL Model Law…helpfully codify these requirements”.

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Comparing the TSIKInvest ruling with the one in Evrobalt, the reason for the different outcome seems to be that in the TSIKinvest case the EA had sidestepped the question whether the harm could be reparable by monetary compensation, focusing on the criteria of urgency and proportionality whereas in the Evrobalt case the EA focused on the reparability of harm criterion and, based on that, he rejected the request for emergency relief without considering the other criteria36. Comparing the Evrobalt case with the Kompozit case we notice that the EAs used a different test for judging the reparability of harm; the EA in Evrobalt used the stricter test of irreparable harm while the EA in Kompozit used the looser test of substantial/significant prejudice37.

In a different case, the Griffin Group v Poland case, the EA rejected the request for emergency interim relief because ‘the tests for such relief had not been met on the facts’38. In that case, the claimant invoked the EA procedure to protect its property

rights to a land in a historic barracks site from a local court judgment. Contrary to the Moldova cases, in Griffin Group v Poland, the respondent participated in the proceedings raising objections to the EA’s jurisdiction. Poland claimed that the EA procedure was not applicable because at the time it had signed the relevant BIT, i.e. BLEU-Poland BIT, there were no EA provisions included in the SCC Rules; moreover, even if the contracting parties to the BIT had envisaged any amendments to the SCC Rules, the EA was still such an extraordinary qualitative change to the SCC Rules that

36_{Luke Eric Peterson, ‘In fourth documented case, an SCC emergency arbitrator in a BIT case weighs in}

on investor request to suspend effects of Central Bank measures’, (Investment Arbitration Reporter, 3 June 2016) www.iareporter.com/articles/in-fourth-documented-case-an-scc-emergency-arbitrator-in-a-bit-case-weighs-in-on-investor-request-to-suspend-effects-of-central-bank-measures/ accessed 13/06/2017

37_{Luke Eric Peterson, ‘Another newly-surfaced emergency arbitrator ruling deepens controversy over}

whether monetary compensation is enough to repair investor harms’,( Investment Arbitration Reporter, 13 July 2016) www.iareporter.com/articles/latest-emergency-arbitrator-ruling-deepens-controversy-over-whether-monetary-compensation-is-enough-to-repair-investor-harms/ accessed 13/06/2017

38_{Luke Eric Peterson, ‘INVESTIGATION: new details emerge about use of emergency arbitrators in}

investment treaty cases’, (Investment Arbitration Reporter, 8 October 2015)

www.iareporter.com/articles/investigation-new-details-emerge-about-use-of-emergency-arbitrators-in-investment-treaty-cases/ accessed 13/06/2017

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Poland could not be deemed to have consented to these provisions39_{. The EA in the} Griffin case touched upon the question of applicability of the EA provisions included in the 2010 SCC Rules, which for the limited purposes of this paper will not be dealt with in this discussion40.

In JKX Oil and Gas and Others v Ukraine the claimant sought urgent interim relief against Ukraine’s double gas production taxation. The EA granted the relief sought by ordering Ukraine to refrain from imposing royalties on the production of gas by the claimant. Another interim award by a later constituted tribunal, in a consolidated arbitration, granted the same relief as the one granted by the EA: ‘an order that Ukraine not collect heightened royalties on gas production while the investment treaty claims are under arbitration’41. Like the Moldova cases, Ukraine did not participate in the EA proceedings. However, it resisted enforcement of the EA award by raising several objections most of which concerned due process, the consent to the EA provisions and issues of public policy42. After a long saga in Ukrainian court system, the Ukraine Higher Specialized Court for Criminal and Civil Cases upheld the EA award, for reasons that we will analyze further below. The JKX case is thus, the first instance where an EA’s award, in the context of investment treaty arbitration, was held enforceable by the domestic courts of the host State.

39_{Lotta Knapp, ‘SCC Practice: Emergency Arbitrator Decisions Rendered in 2014’}

www.sccinstitute.com/media/62020/scc-practice-emergency-arbitrators-2014_final.pdf accessed 13/06/2017

40_{The EA procedure applied in all six investment cases was based on treaties concluded at a time when}

EA provisions did not even exist and thus raise the question whether a host state should be deemed to have consented to emergency arbitration. This is not merely a question of temporal application of EA provisions but rather and most importantly it is a question of state consent; see also Joel Dahlquist, (n11), 265

41_{Luke Eric Peterson, (n 38)}

42_{Koh Swee Yen (n 6), 546: ‘Ukraine was not given due notice of the appointment of the EA and EA}

process and could not present its case’ (due process), ‘the SCC Rules did not contemplate the use of EA at the time Ukraine had ratified the ECT’ (consent) and the EA ‘infringed upon Ukraine’s authority to raise royalty taxes and would breach fundamental principles of Ukraine’s tax system’ (public policy).

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Finally, in the most recent investment emergency case, Benin was ordered to prevent enforcement of a domestic court decision against a local subsidiary of the Luxembourgish investor Puma Energy Holdings (Luxembourg) Sarl43. The investor requested urgent interim protection from what, according to the EA, appeared to be a ‘grotesquely flawed’ domestic judgment ordering the investor to pay an ‘arbitrary and exorbitant’ compensation within eight days from its issuance44_{. After finding, on a} prima facie case, that the domestic judgment lacked ‘due process requirements’ and satisfying that such a measure would economically ‘extinguish’45 the investor especially within the eight-day limit, while there was nothing in the emergency relief which could prejudge the merits, the EA rendered an emergency award ordering Benin to prevent enforcement of the local court decision. Benin, which neither responded to the EA’s notifications nor participated in the proceedings, is now seeking revocation of the award for lack of due process46.

Looking at the state-of-the-art, one can tell that the EA procedure, albeit offering to investors the most timely efficient interim relief, raises due process and State sovereignty concerns regarding the ability of States to respond promptly within the short time frames and the interference of emergency relief with States’ regulatory powers. However, firstly it is necessary to present a normative framework of due process and State sovereignty in order to examine next their relationship with the EA procedure.

43_{Puma Energy Holdings (Luxembourg) SARL v the Republic of Benin, SCC Case No. SCC EA 2017/092} 44_{Jarrod Hepburn, ‘ANALYSIS: Stockholm arbitrator finds emergency measures justified against Benin}

where entire investment faces extinguishment due to alleged denial of justice’, (Investment Arbitration Reporter, 14 June 2017) www.iareporter.com/articles/analysis-stockholm-arbitrator-finds-emergency- measures-justified-against-benin-where-entire-investment-faces-extinguishment-due-to-alleged-denial-of-justice/ accessed 14/07/2017

45_Ibid

46_{Jarrod Hepburn, 'Benin seeks revocation of emergency award, as investor follows up with formal BIT}

claim’, (Investment Arbitration Reporter, 11 July 2017) www.iareporter.com/articles/benin-seeks-revocation-of-emergency-award-as-investor-follows-up-with-formal-bit-claim/ accessed 14/07/2017; pursuant to article 9(2) Appendix II SCC Rules: ‘The emergency decision may be amended or revoked by the Emergency Arbitrator upon a reasoned request by a party’.

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D. Chapter II - Due process and Emergency Arbitrator procedure

1. International Arbitral Due Process

Due process or procedural fairness is a general principle of international law47, often viewed as another source of legitimacy of international adjudication48 and an essential element of the rule of law concept49. Thus, if arbitration is to be considered legitimate and fair, due process requirements need to be observed throughout all the stages of the arbitral proceedings50, including pre-arbitral proceedings, i.e. the emergency relief procedure. Despite the lack of a universal and comprehensive definition of due process51_{and for the purpose of this paper, two commonly accepted components or} sub-principles of due process are relevant for our analysis: the parties’ right to be heard or opportunity to present their case and the obligation of the arbitral tribunal to treat the

47_{Charles T. Kotuby JR, ‘General Principles of Law, International Due Process and The Modern Role}

of Private International Law’, Duke Journal of Comparative International Law, (2013) 23, 411-443, 427: ‘These core concepts of international due process can be directly traced to the general principles of law…based in the positive laws that apply in domestic legal systems’.

48_{Filippo Fontanelli and Paolo Busco, ‘The Function of Procedural Justice in International Adjudication’,}

The Law & Practice of International Courts and Tribunals (2016) 15 (1), 1-23, 3-4

http://booksandjournals.brillonline.com/content/journals/10.1163/15718034-12341310 accessed 13/06/2017

49_{Rudolf Dolzer and Christoph Screuer, Principles of International Investment Law (OUP 2012), 154:}

‘Fair procedure is an elementary requirement of the rule of law...’; Gus Van Harten, ‘Investment Treaty Arbitration, Procedural Fairness and The Rule of Law’ in Stephan W. Schill ed., International Investment

Law and Comparative Public Law (OUP 2010), Chapter 20, 627-658, 636: ‘a greater level of agreement

on what the rule of law should mean procedurally, even if procedural fairness is itself a flexible concept…’.

50_{UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration,}

97: ‘The obligation to treat parties with equality requires the arbitral tribunal to apply similar standards to all parties and their representatives throughout the arbitral process’.

51_{Fabricio Fortese and Lotta Hemmi, ‘Procedural Fairness and Efficiency in International Arbitration’,}

Groningen Journal of International Law, (2015) 3 (1): International Arbitration and Procedure, 110-124, 112

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parties equally52_{. This means that the EA shall make sure that both parties are treated} equally and that they are both given the opportunity to present their case. However, in addition to a duty for procedural fairness, an arbitrator bears also a duty for procedural efficiency, that is to resolve the dispute in an expeditious, cost-effective and timely manner. Both national and international arbitration rules testify to the importance of these two duties in international arbitral proceedings, although the duty for efficiency and its relationship with due process is analyzed in the last section of this chapter. The New York Convention on the Recognition and Enforcement of Foreign Awards (NYC) sets due process requirements as reasons for refusal for recognizing and enforcing a foreign arbitral award53. The ICC Arbitration Rules also state in article 23(4) that ‘the arbitral tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case’. The UNCITRAL Model Law on International Commercial Arbitration (Model Law) states explicitly in article 18 that ‘the parties shall be treated with equality and each party shall be given a full opportunity of presenting his case’54_{while it uses the same reasons as the NYC as grounds of setting} aside or refusing recognition and enforcement of an award55_{. In the ICSID Convention} one of the exclusive reasons to annul an award is ‘a serious departure from a fundamental rule of procedure’56_{. Most national arbitration laws, some of which have} adopted Model Law, employ the same procedural requirements using same or similar language. However, this general agreement on the principles guiding the arbitral

52_{Gabrielle Kaufmann-Kohler, ‘Globalization of Arbitral Procedure’, Vanderbilt Journal of}

Transnational Law (2003) 36, 1313-1333, 1321; Fortese and Hemmi, (n 51), 112

53_{NYC article V(1)(b)}

54_{UNCITRAL 2012 Digest of Case Law (n 50), 97: ‘Article 18 of the Model Law lays down the}

fundamental requirements expected of an arbitral tribunal for procedural justice, namely: 1) equal treatment of the parties; and 2) full opportunity to present one’s case’; Christoph Schreuer, ‘The ICSID Convention: A Commentary’, 2001, Cambridge University Press, 971 citing Annulment ICSID Committee in MINE v. Guinea, Decision on Annulment, 22 December 1989, ICSID Reports: ‘The Committee considers that a clear example of such a fundamental rule is to be found in Article 18 of the UNCITRAL Model Law on International Commercial Arbitration…’.

www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf accessed 13/06/2017

55_{UNCITRAL articles 34(2)(a)(ii) and 36(1)(a)(ii) respectively} 56_{ICSID Convention article 52(1)(d)}

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procedure does not mean specific agreement on the details; on the contrary, ‘the exact parameters of due process may fluctuate from one legal system to another’57_.

Procedural fairness guarantees are included in the arbitral rules under which the EA procedure is available for investment disputes, i.e. the SCC Rules and the SIAC IA Rules. Specifically, the EA provisions in the SCC rules provide that the EA ‘shall conduct the arbitration in an impartial, practical and expeditious manner, giving each party an equal and reasonable opportunity to present its case’58_{and the SIAC IA Rules} mention that the EA ‘shall provide a reasonable opportunity for the parties to be heard’59_.

Although the applicable arbitration rules including EA provisions provide for due process requirements, the question arising in the context of investment treaty arbitration is whether the EA procedure can indeed guarantee that the host State is actually given a reasonable opportunity to present its case and consequently is treated equally to the investor and if not, whether this deficiency of due process can be justified by the

asymmetrical relationship of the parties or outweighed by the EA’s duty for efficiency.

2. ‘Asymmetry’ as justification

The problematic feature of the EA procedure in investor-State disputes is the speed of the procedure itself in relation to the actual difficulties of States to respond to emergency requests. The fact that EA provisions included in the SCC Rules were initially designed for private commercial disputes60 explains their impressively swift

57_{Kaufmann-Kohler, (n 52), 1322; Fortese and Hemmi, (n 51), 115: ‘The English Arbitration}

Act…requires that the parties have a reasonable opportunity. In France, the law provides that “the arbitral tribunal shall rule after having heard the parties or having given them the opportunity to be heard”. Similarly, in the Netherlands…obligation to give each party “an opportunity to substantiate his claims and to present his case” …Equally, in Sweden, “the arbitrators shall afford the parties, to the extent necessary, an opportunity to present their respective cases…”.

58_{SCC Rules article 19 and Appendix II – Emergency Arbitrator article 7} 59_{SIAC IA Rules Schedule 1 – Emergency Arbitrator para 7}

60_{Luke Eric Peterson, ‘INVESTIGATION: In At Least Two Investment Treaty Cases, Foreign Investors}

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nature. In international commercial arbitration, the parties to the dispute are both private parties and thus, find themselves in a relatively equal and symmetrical relationship. Conversely, in investment treaty arbitration the parties are not equal and as we noted earlier above, their relationship is rather asymmetrical. The main feature of this

asymmetry is the fact that, contrary to commercial arbitration, only an investor is

entitled to bring a claim against a State and not vice versa. However, the mere fact that a process is asymmetrical does not necessarily mean that it is also unfair, at least not if there is a reason behind it.

As professor Thomas W. Walde points out, the reason for this asymmetry is the initial unequal positions of the disputing parties: the foreign investor is subject to the domestic law and governmental control of the host State61. IIAs, by granting the right to bring a claim only to investors, compensate for the initial asymmetry between the parties. After all, the contracting States remain the masters of the applicable IIA while the foreign investor is merely benefiting from it. As professor Walde notes, ‘the very fact of asymmetry is therefore implicit in using a system of judicial review of government conduct’, like investment treaty arbitration62_.

Admittedly, the fact that the foreign investor is the only beneficiary of the EA procedure, does not seem unfair or irrational. On the contrary, it is consistent with the rationale behind the investment treaty arbitration regime, as explained above, that only the investor can initiate arbitration. The foreign investor is the only entitled to invoke EA proceedings for the same reason he is the only entitled to bring a claim in arbitration. However, the fair or necessary asymmetry between the investor and the host State does not seem to be a sufficient justification for granting an investor an advantage of emergency relief. On the contrary, the extremely short timeframe of the EA procedure is so burdensome for a State that renders the initially accepted asymmetry unfair if one

Reporter, 17 February 2015) www.iareporter.com/articles/investigation-in-at-least-two-investment- treaty-cases-foreign-investors-use-emergency-arbitrators-to-block-tax-hikes-and-share-divestment-order/ accessed 13/06/2017

61_{Thomas W. Walde, ‘Procedural Challenges in Investment Arbitration under the Shadow of the Dual}

Role of the State’, (2010) 6 (1) Arbitration International, 3-42, 15

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takes into consideration that States as respondents in arbitration are likely to be less apt to respond in such a quick fashion than a private party would63_.

3. Actual difficulties and ‘actual’ due process

There are a lot of issues linked to the sovereign or non-private nature of a State which hinder its ability to respond promptly to a notice of arbitration or a notice of EA procedure. Reading J. K. Sharpe’s article on representing a State as respondent in investment treaty arbitration, one gets an insight into the inner difficulties lying in preparing a State’s defense64.

The lack of organized standard procedure for responding to claims, the complicated structure between the State bodies, agencies and ministries, difficulties of finding and reproducing relevant documents, lack of financial resources, bureaucratic problems, the inexperience of in-house counsel or the cost and formalities of hiring an outside counsel, to name a few, can seriously delay a State’s preparation against a claim and risk its non-representation65_{. An investor as claimant, on the other hand, has the luxury} of time to build his strategic plan, do his research and structure his arguments66_. Comparing the position of the two, it appears that a State is, in general, in a less favored

63_{Joel Dahlquist, (n 13)}

64_{Jeremy k. Sharpe, ‘Representing a Respondent State in Investment Arbitration’, in Chiara Giorgetti}

ed., Litigating International Investment Disputes: A Practitioner's Guide, (Brill Nijhoff 2014), Chapter 3, 41-79

65_{Ibid, 45: ‘If not sorted out quickly, the State can severely hamper its ability to defend itself adequately}

or even worse, cause the State not to appear at all’; Maxim Osadchiy, (n 12), 248: ‘an application for

emergency relief risks getting lost in government bureaucracy. It can take weeks for the machinery of the state to respond to such an application, particularly where the state lacks a developed institutional capacity to deal with international disputes…Moreover, the time-frame to respond to an emergency relief application may complicate procuring external legal advice…and that process may take months to complete’.

66_{J. K. Sharpe (n 64), 44: ‘While the best prepared claimant may be ready on day one, a State may still}

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and more time stressing position to defend itself. The challenges a State has to deal with, when preparing to present its case before an arbitral tribunal, are more complicated in terms of procedure and definitely more time demanding than the ones a claimant has to face67.

The above-mentioned challenges represent the regular difficulties a State is likely to encounter in normal arbitral proceedings. In EA proceedings on the other hand, the burden for a State to respond becomes a lot heavier as the time within which it has to react is shrinked. An EA has to issue a decision within five days after his appointment under the SCC Rules and within fourteen under the SIAC IA Rules68. There is of course the possibility of extending the time limit, under certain conditions69, but the timeframe remains in principle very tight.

According to the EA procedure under the SCC Rules, and with a small difference in days also under the SIAC IA Rules, within a day after an application for EA is made, an EA is appointed and the respondent is informed. Also within a day after the appointment of the EA, the latter contacts both parties requesting them for submissions. Expecting from a State to prepare and present its case before the EA within five or even fourteen days is a high expectation, not to say unrealistic70. Neither is it realistic to expect from a State to submit a response to the EA within a day after the appointment of the EA71_{. If usual timeframes during normal arbitral proceedings are hard to be} followed by States, then the ones set out for pre-arbitral proceedings seem rather infeasible, if not impossible.

67_{Ibid, 73: ‘This may reflect not only their position as a respondent, but also that it may be much more}

time-consuming for a State to prepare its pleadings and have them reviewed and approved by relevant government entities’.

68_{Article 8(1) Appendix II SCC Rules and Schedule 1 para 9 SIAC IA Rules respectively}

69_{Ibid ‘upon reasoned request by the EA or if otherwise deemed necessary’ under the SCC Rules and ‘in}

exceptional circumstances’ under the SIA IA Rules

70_{Joel Dahlquist, (n 11), 270: ‘For a State five days is a short time to present a defense. Inexperienced}

states especially will have a hard time even obtaining competent counsel within that time’.

71_{In the aforementioned EA cases, pursuant to the SCC Rules, the EA requested from the respondent}

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In fact, in almost all the cases where the EA procedure was applied the respondent State did not participate in the EA proceedings72_{. Although we cannot know for sure the exact} reason of non-participation of the respondent States, i.e. whether it was the inability to cope with the tight schedule or whether it was unwillingness on the part of the States73, the fact that they did not appear before the EA and thus, were not heard by him, speaks against any argument that procedural fairness requirements are met under the EA procedure. The emergency provisions of SCC or SIAC IA Rules do not specify what are the duties of an EA or the consequences, if any, in case the respondent does not respond or participate in the proceedings but they leave open the possibility for revocation or modification of the emergency award for good reason74. In fact, the State in the Puma Energy v Benin case relied on this possibility and requested revocation of the EA’s award on the grounds of lack of due process, claiming that ‘it was not properly notified, leaving it with no opportunity to defend itself in the proceedings’75_.

Admittedly the requirement that the respondent be given due notice of the EA procedure was observed in all the cases, and thus, theoretically and potentially the respondent had an opportunity to present its case. Quite ironically under the same logic, in the JKX v

Ukraine case the Kiev Court, which enforced the EA’s award, rejected Ukraine’s

objection that it could not present its case76_.

At first glance and from a rather abstract perspective, this theoretical opportunity does not appear to be a reasonable opportunity to present one’s case, as requested by the EA

72_{Only in Griffin Group v. Poland, SCC EA, 2014 case did the respondent take part in the proceedings}

raising objections against the EA’s jurisdiction.

73_{Koh Swee Yen, (n 6), 538}

74_{Article 9 (2) Appendix II SCC Rules and Schedule 1 para 8 SIAC Rules} 75_{Jarrod Hepburn (n 46)}

76_{Luke Eric Peterson, ‘Investor takes emergency arbitrator award under Energy Charter Treaty to a}

Ukraine court and obtains enforcement of tax-freeze holdings’, (Investment Arbitration Reporter, 29 June 2015): ‘Without seeming to comment on the limited amount of time given to Ukraine within this context, the Court was satisfied that the state had an opportunity to present a response to the emergency arbitration application’ www.iareporter.com/articles/investor-takes-emergency-arbitrator-award-under-energy-charter-treaty-to-a-ukraine-court-and-obtains-enforcement-of-tax-freeze-holdings/ accessed 13/06/2017

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provisions themselves77_{. On the contrary, the limited time a respondent has to abide by} is so burdensome on it that it renders this opportunity fictional or illusionary78_. Although what means reasonable depends on the circumstances of a specific case79, in general, given the actual difficulties inherent in a State’s sovereign nature to deal with a notice of arbitration, merely a few days cannot qualify as a reasonable and realistic time period within which a State can actually and sufficiently defend itself80. However, judging the EA procedure’s timeframes from a more concrete perspective, by using a specific benchmark, such as the timeframe of emergency procedures in national administrative courts, can lead us to a different conclusion.

The time limits within which a State can respond to a request for emergency relief brought by a private party before the domestic administrative courts can be used as an indicator of what constitutes a reasonable timeframe according to the laws of that State. In principle, at least in civil law jurisdictions, a party wishing to challenge an administrative measure before the domestic courts, must beforehand lodge an objection or administrative appeal against the administrative authority which issued the challenged measure. Despite any variations among countries, usually during these pre-trial proceedings administrative authorities have a large timeframe to reply, ranging between 6 weeks and 3 months while in most cases initiating these pre-trial proceedings does not have a suspensive effect on the challenged administrative measures81_.

77_{SCC Rules article 19 and Appendix II – Emergency Arbitrator article 7; SIAC IA Rules Schedule 1 –}

Emergency Arbitrator para 7

78_{UNCITRAL 2012 Digest of Case Law (n 50), 98: ‘An arbitrator’s duty to hold hearings is not}

discharged by merely allowing a formal presentation by the parties and thereafter disregarding or ignoring it’.

79_{Restatement of the Law Third, The U.S. Law of International Commercial Arbitration, Council Draft}

No. 3 (December 23, 2011): ‘These standards generally require that each party be afforded a reasonable amount of time in which to prepare and present evidence and argument to the tribunal’.

http://arbitrateatlanta.org/wp-content/uploads/2012/04/US-InterComArbit_CD3_Booked.pdf accessed 13/06/2017

80_{M. Osadchiy (n 12), 254: ‘it may not always be realistic to expect a state to respond to an application}

for emergency relief within a few days’.

81_{World Bank, ‘Pre-trial procedures in administrative justice proceedings in England and Wales, France,}

Germany, and the Netherlands : a comparative study with a view to the possible development of pre-trial procedures in administrative law in Turkey’, (Washington, DC 2010), 118

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However, the complaining parties have the option, in case of urgency, to request interim relief from the domestic courts subsequently to the administrative appeal or objection82_. For example, pursuant to the Dutch General Administrative Law Act, if an interested party wishes to suspend the effects of an administrative measure, pending pre-trial proceedings, he must request provisional relief83 through summary proceedings simultaneously with the objection against the administrative authority84_{. The court, during} summary proceedings, will decide normally within one or two months or if necessary within a few days85. In an even swifter manner, the French administrative emergency judge (juge des référés) during summary proceedings can grant interim relief pending an objection before the administrative authority within a very short time period, varying from 48 hours to one month depending on the urgency degree86. These emergency procedures before national administrative courts indicate that emergency interim relief on a national level is, in principle, a quick procedure providing for relatively short deadlines within which administration can respond, similar to those provided by the EA procedure. Thus,

http://documents.worldbank.org/curated/en/203161468110646088/Pre-trial-procedures-in- administrative-justice-proceedings-in-England-and-Wales-France-Germany-and-the-Netherlands-a- comparative-study-with-a-view-to-the-possible-development-of-pre-trial-procedures-in-administrative-law-in-Turkey accessed 26/07/2017 82_{Ibid, 102}

83_{Pieter van Dijk, ‘10}th_{CONGRESS OF THE IASAJ Sydney – March 2010 Review of administrative}

decisions of government by administrative courts and tribunals REPORT FOR THE NETHERLANDS’, 24 www.aihja.org/images/users/1/files/netherlands.en.0.pdf accessed 23/07/2017

84_{World Bank (n 81), 93}

85_{European Union Agency for Fundamental Rights (FRA), ‘Access to justice in Europe: an overview of}

challenges and opportunities’, 12 http://fra.europa.eu/en/country-report/2012/country-thematic-studies-access-justice accessed 26/07/2017

86_{Association of Councils of State and Supreme Administrative Jurisdictions of the European Union}

(ACA-Europe), ‘ADMINISTRATIVE JUSTICE IN EUROPE - Report for France’, www.aca-europe.eu/en/eurtour/i/countries/france/france_en.pdf accessed 24/07/2017; Découverte des institutions de la vie publique - Les différents référés www.vie-publique.fr/decouverte-institutions/institutions/approfondissements/differents-referes.html accessed 24/07/2017: ‘Le juge se prononce dans un délai compris entre 48 heures et un mois, ou plus, en fonction de l’urgence’while in some types of interim relif ‘Cette procédure de référé permet au juge administratif d’ordonner « toutes mesures utiles » destinées à sauvegarder les droits des parties avant même que l’administration ait prise une décision’.

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contrary to the argument presented earlier, one could argue that the timeframes of the EA procedure do not offer such an unrealistic or unreasonable opportunity to States to defend themselves taking into consideration that the same States have provided for similarly swift interim protection before their domestic courts.

Nevertheless, even if emergency relief in terms of deadlines is similar in both domestic litigation and international arbitration, States have, in general, a better chance of responding to their own courts. Due to already established and known domestic court procedures, the actual difficulties of preparing a case before an arbitrator, as discussed above, do not appear, at least not to the same degree, in domestic litigation. Therefore, although it is plausible to argue that the speed of the EA procedure does not compromise a State’s opportunity to be heard since the time to respond is equally short in both court and arbitral proceedings, this paper takes the opposite view. Comparing the time stressful position of the State to respond to emergency proceedings with the investor’s

head-start advantage to initiate these proceedings, it argues that albeit States have

theoretically an opportunity to be heard, they cannot avail themselves of this opportunity.

As preliminary conclusion, it seems that emergency proceedings are not appropriately designed to guarantee an observance of due process requirements allowing the EA to fulfill its duty of treating both parties equally and giving them a reasonable opportunity to be heard. Conversely, they seem suitably designed to provide timely interim relief, focusing on efficiency, which is also a duty of an arbitrator and one could argue it compensates for any lack of procedural fairness. The following section discusses the importance of efficiency in arbitral proceedings and addresses the question whether it can outweigh due process.

4. Efficiency v Due Process

An EA, as well as an arbitral tribunal, apart from the duty to ensure that both parties are treated equally and they are both given an opportunity to present their case, also has a duty for efficiency. Usually efficiency is only correlated to cost and time effectiveness but, as F. Fortese and L. Hemmi explain, it is also a corollary of fairness, since ‘justice delayed becomes justice denied’ while an unfair procedure cannot be considered an

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efficient procedure87_{. What an arbitrator has to do, in order to discharge both its duties,} is to find the right balance between the two, providing for a fair and efficient procedure88.

The duty for efficiency is provided for in national arbitration laws and international arbitration rules. For example, the Dutch Arbitration Act states that ‘the arbitral tribunal shall guard against unreasonable delay of the proceedings’89_{while the Swedish} Arbitration Act requires the arbitrators to ‘handle the dispute in an impartial, practical and speedy manner’90_{. The SCC Rules state that, both the arbitral tribunal and the EA,} ‘shall conduct the arbitration in an impartial, practical and expeditious manner’91_{. The} SIAC IA Rules require for appointing an arbitrator his availability ‘to determine the case in a prompt and efficient manner' and that the tribunal ‘conduct the arbitration in such manner it considers appropriate…to ensure the fair, expeditious, economical and final resolution of the dispute’92_{. The ICC Rules refer also to the obligation of the} tribunal to conduct the proceedings ‘in an expeditious and cost-effective manner’ and to the obligation of the EA to ‘conduct the proceedings in the manner which the emergency arbitrator considers to be appropriate, taking into account the nature and the urgency of the Application’93.

Most national and international arbitration rules grant the arbitrators a general discretional power to conduct the proceedings in the manner they consider to be appropriate in order to ensure ‘effective case management’94_{. This flexible tool speaks} for the importance of procedural efficiency in international arbitration. Moreover, the fact that most international arbitral institutions provide in their rules for faster dispute settlement procedures, some through expedited proceedings – e.g. ICC Rules, SCC Rules – others through summary proceedings – e.g. NAI Rules - and others through EA

87_{F. Fortese and L. Hemmi, (n 51), 116}

88_{Ibid: ‘due process needs to be balanced against the arbitrator’s duty to ensure the efficient and timely}

completion of their mandate to resolve the dispute’.

89_{Dutch Code of Civil Procedure article 1036(3)} 90_{Swedish Arbitration Act section 21}

91_{SCC Rules article 19(2) and Appendix II article 7} 92_{SIAC IA Rules article 10.3 and 16.1}

93_{ICC Rules article 22(1) and Appendix V article 5(2)} 94_{F. Fortese and L. Hemmi, (n 51), 121}

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proceedings – e.g. SCC, ICC and SIAC IA Rules – demonstrates the tendency of international arbitration towards quicker and more efficient dispute resolution.

The EA procedure is an example par excellence of procedural efficiency, providing for the timeliest and most effective protection of the claimant’s rights. The question arising in the context of investment treaty arbitration is whether an argument can be made in favor of the use of EA procedure in investor-State disputes, based on the duty for procedural efficiency as counterargument to due process concerns. In other words, can the need for swift and efficient relief compensate for any lack of procedural fairness? The key element in EA proceedings and one of the conditions for emergency relief to be granted, is urgency95. Thus, a foreign investor invoking the EA procedure is in need of urgent, interim relief to protect its investment from an urgent - i.e. imminent - harm caused by a regulatory measure of the host State. In case of urgent or imminent harm, efficient protection of an investor’s rights can only be guaranteed through prompt, timely relief and consequently, procedural efficiency of the arbitration can only be guaranteed through the efficient protection of the investor’s rights. As the EA in TSIK

v Moldova case said, ‘the purpose of interim measures is securing a claim or a future

claim and safeguarding the applicant’s rights. In other words, the purpose of interim measures is to preserve the possibility that the arbitration can proceed effectively and that any ultimate award will be capable of being give effect’96_{. Therefore, it is possible} to argue that an investor’s need of urgent, interim relief falls under the ambit of an EA’s duty of procedural efficiency.

Nevertheless, the most important question is whether the duty of procedural efficiency outweighs the duty of procedural fairness. Weighing the two duties bearing on the arbitrators - either EA or arbitral tribunal – one cannot help but notice that procedural fairness carries more weight than efficiency, in terms of consequences in case of non-observance. More specifically, non-observance of the former can lead to an unenforceable, null award which can be set aside or be denied recognition and enforcement, whereas non-observance of the latter, only under exceptional cases of

95_{Kompozit LLC v Moldova para 67: ‘The emergency arbitrator finds appropriate to require the claimant}

to comply with the urgency test…since Article 7 of Appendix II of the SCC Arbitration Rules provides that the urgency is inherent in the emergency proceedings’.

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serious inefficiency, can it lead to denial of recognition and enforcement of the arbitral award97_{. Taking into account that delivering a final and binding award capable of being} recognized and enforced is the main and ultimate obligation of arbitrators, it is clear that due process outweighs efficiency and thus, one cannot claim that efficiency considerations observed in EA proceedings compensate for the lack of due process. The mere fact that the EA procedure aims at ensuring efficient investor protection and efficient completion of the arbitral proceedings is not enough to overlook the due process concerns this procedure creates for the State.

Overall, the EA procedure, designed with commercial disputes in mind, does not take into account the actual difficulties a State respondent encounters when preparing its defense. The short deadlines within which a State can respond do not seem to offer a realistic and reasonable opportunity to present its case, while favoring only the investor. Consequently, the speed of emergency proceedings cannot guarantee equal treatment of the parties if a respondent has no real opportunity to be heard. Moreover, this lack of procedural fairness cannot be justified by the asymmetry rationale nor outweighed by the EA’s duty for efficiency.

E. Chapter III - State sovereignty and Emergency Relief

1. Emergency and other non-pecuniary remedies

This chapter analyzes the impact emergency relief has on States’ regulatory powers compared to other non-pecuniary remedies. It starts by presenting the (conflictual) relationship between States’ sovereign right to regulate and non-pecuniary remedies and continues by examining whether emergency relief, given its specific traits - pre-determined short duration, investor-specific scope and conditional application - interferes with States’ regulatory measures to such an extent that it impinges on its sovereignty.

97_{F. Fortese and L. Hemmi, (n 51), 124: ‘procedural fairness must prevail for the arbitral award to be}

recognized and enforceable. Inefficiency may not carry serious consequences on the award, unless it in fact causes serious injustice…’.

THE USE OF EMERGENCY ARBITRATOR PROCEDURE IN INVESTMENT TREATY ARBITRATION : COUNTERWEIGHT TO STATES’ REGULATORY POWERS OR UNEVEN HEAD-START FOR INVESTORS?