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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: 28th 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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Table of Contents

A. List of Abbreviations .............................................................................................. 4

B. Introduction ............................................................................................................ 5

C. Chapter I - State-of-the-art ................................................................................... 10

1. Emergency Rules for Investment Disputes ....................................................... 10

2. Emergency Investment Cases ........................................................................... 11

D. Chapter II - Due process and Emergency Arbitrator procedure ........................... 17

1. International Arbitral Due Process.................................................................... 17

2. ‘Asymmetry’ as justification............................................................................. 19

3. Actual difficulties and ‘actual’ due process ...................................................... 21

4. Efficiency v Due Process .................................................................................. 26

E. Chapter III - State sovereignty and Emergency Relief ............................................ 29

1. Emergency and other non-pecuniary remedies .................................................... 29

2. Non-pecuniary relief and State sovereignty ...................................................... 31

3. Emergency Relief: interference or counterweight ............................................ 33

4. An a fortiori argument ...................................................................................... 36

5. Standards as a ‘safety valve’ ............................................................................. 38

F. Conclusion ............................................................................................................ 39

G. List of cases .......................................................................................................... 42

H. Bibliography............................................................................................................ 42

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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

(1), 157

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

urgency, irreparable/significant harm, proportionality and non-prejudgment of the merits.

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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)

Journal of International Arbitration 34 (2), 239-256, 240

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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 non-

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

supra (n 2).

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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’.

21 Article 4(1) Appendix II SCC Rules

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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’.

29 Joel Dahlquist, (n 11)

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on the following main criteria: a) prima facie case on the merits30, b) urgency31 and c)

irreparable harm32 or significant/substantial prejudice33, 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

40The 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

Use Emergency Arbitrators to Block Tax Hikes and Share Divestment Order’, (Investment Arbitration

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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

62 Ibid, 16

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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

be struggling to figure out what is happening, let alone how to respond’.

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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

state to submit an answer within a day from its own appointment.

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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

Page 24 of 47

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, ‘10th 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’.

Page 26 of 47

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

Page 27 of 47

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’.

96 TSIKInvest LLC v Moldova para 49

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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…’.

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Emergency interim relief requested under the EA procedure, like any other kind of

interim relief or provisional relief as it is otherwise often called, necessarily has a non-

pecuniary nature. That means that, contrary to a pecuniary relief incurring a duty to pay

damages - which is the rule for final relief - an interim relief imposes on the party,

against which such relief is sought, a duty to act or refrain from acting, e.g. taking the

form of restitution, specific performance or injunction. Given the main purpose of

interim relief, i.e. the preservation of the status quo and the rights of the aggrieved party

from imminent irreparable harm98, it is logical that this type of relief take a non-

pecuniary form. Moreover, interim or provisional relief has, as its own name indicates,

a provisional nature, meaning that it involves temporary measures which remain in

force only until the final award is issued or until the tribunal decides to amend or

terminate them.

Likewise, the EA procedure has the same purpose with normal interim measures

procedure and emergency measures ordered under emergency proceedings are also

temporary like provisional measures, although the duration of the former is much

shorter. The only difference between emergency relief procedure and normal interim

relief procedure is the timing: the EA procedure aims at providing a party with urgent

interim relief at a pre-arbitral stage, namely when the need of preservation of the status

quo is of such an urgent nature that the aggrieved party cannot await the constitution of

the tribunal99. It is precisely this timing difference and thus, the precocity of the

emergency proceedings that raises the questions of its appropriate application in

investor-State disputes.

In the context of investment treaty arbitration, the party requesting for (emergency)

interim relief is the foreign investor and the party ordered to provide with this relief is

the host State. In general, the use of non-pecuniary remedies in investment arbitration,

98 Model Law article 17(2)

99 ICC Rules article 29(1): ‘A party that needs urgent interim or conservatory measures that cannot await

the constitution of an arbitral tribunal (“Emergency Measures”) may make an application for such

measures pursuant to the Emergency Arbitrator Rules in Appendix V’.

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mostly as final relief and less as interim, has been criticized as non-appropriate for

settling investor-State disputes and such remedies have been rarely granted100.

2. Non-pecuniary relief and State sovereignty

One of the main concerns about non-pecuniary remedies is State sovereignty. Arbitral

tribunals are usually reluctant to grant non-pecuniary measures as final award and tend

to pay a high degree of deference to States’ sovereignty101. This stems from a common

belief that remedies like restitution, specific performance and injunctive relief impinge

on States’ sovereignty to a much greater extent than pecuniary remedies102.

A State as a sovereign enjoys broad regulatory powers in pursuance of its public policy

purposes, e.g. public health, taxation, environment etc. as these powers emanate from

its sovereign nature103. Investment treaty arbitration impedes host States’ right to

regulate, when regulatory measures are found in breach of IIAs, either through a

damages award, obliging the State to pay the prejudiced investor, or even more through

a non-monetary award, by obliging the State to repeal or not apply its measures.

It has been well established in arbitral case law that imposing on a State an obligation

to reinstate an investor in its previous contractual position or to restore the previous

100 Berk Demirkol, ‘Remedies in Investment Treaty Arbitration’, (2015) 6 (2) Journal of International

Dispute Settlement, 403-426, 407-408: ‘It is indeed traditionally a private law remedy and it is “not

originally used to address sovereign misconduct in public law”’ citing G. V. Harten, ‘Investment Treaty

Arbitration and Public Law’, (OUP 2007), 104-105

101 Michelle Bradfield and J. C. Thomas, ‘Non-Pecuniary Remedies: A Missed Opportunity?’, (2015) 30

(3) ICSID Review, 653-664, 659: ‘There is a preference in case law to defer to State sovereignty’.

102 Ibid 657: ‘There is a long-held perception among tribunals that to order a State to take a positive

measure, such as ordering restitution or an injunction, involves a greater infringement of the State’s

sovereignty than requiring it to pay pecuniary damages’.

103 Valentina Vadi, Analogies in International Investment Law and Arbitration, (Cambridge University

Press 2016), 67: ‘the right to regulate is a basic attribute of sovereignty under international law’ citing

M. Sornarajah, ‘Right to Regulate and Safeguards’, in UNCTAD, ‘The development dimension of FDI:

Policy and rule-making perspectives’ (New York/Geneva: UN 2003), 205

http://unctad.org/en/Docs/iteiia20034_en.pdf accessed 13/06/2017

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regulatory regime, when the State has repudiated or ended in a final way by means of a

sovereign act the investor’s entitlement, constitutes ‘a reparation disproportional to the

interference with the State’s sovereignty when compared to monetary

compensation’104. Conversely, when the investor’s entitlement, the State’s commitment

or their contractual relationship remains in force, arbitral tribunals have the power to

order non-pecuniary remedies105.

However, there is also a contradicting view according to which there is no restriction

upon arbitrators, under international law, to grant non-pecuniary relief and this type of

relief does not infringe a State’s sovereignty106. Professor Schreuer has stated that ‘the

ability to order specific performance is inherent in a tribunal’s jurisdiction’ and has

anticipated that specific performance or injunctive relief may be the most appropriate

remedy in future disputes arising from ongoing relationships107. The EA in the Evrobalt

v Moldova case also confirmed that arbitral tribunals108 have ‘affirmed the availability

of relief consisting in “measures concerning performance or injunction as a matter of

principle”’109.

The above concerns arise also in the case of emergency interim relief since the EA

procedure mainly involves the issuance of non-pecuniary measures, usually injunctive

relief ordering the host State to refrain from applying its regulatory measures which

pose an imminent and irreparable harm on the investor’s rights. The fact that these

104 Demirkol (n 100), 409; Occidental v Ecuador s82

105 Gisele Stephens-Chu, ‘Is it always about the money? The appropriateness of non-pecuniary remedies

in investment treaty arbitration’, (2014) 30 (4) Arbitration International, 661-686, 678

106 Demirkol (n 100), 408: ‘The orthodox view argues that there is not any restriction restraining the

powers of tribunals to order these reliefs’ citing C. H. Schreuer, ‘Non-pecuniary Remedies in ICSID

Arbitration’, (2004) 20 ArbInt, 325, 331

107 Schreuer (n 106), 331-332; Stephens-Chu, (n 105), 685: ‘While limited authority exists for the award

of non-pecuniary remedies in investor-state arbitrations…it is clear from tribunal’s decision in recent

years that damages are not invariably the most appropriate remedy’.

108 Referring to Enron v Argentina and Micula v Romania cases.

109 Evrobalt v Moldova para 50: ‘although in practice such relief is ordered rarely, as a complement to

monetary compensation [referring to Siemens v Argentina and ADC v Hungary], or as an alternative to

compensation at the election of the state [referring to Goetz v Burundi and Arif v Moldova], or where

compensation will not amount to full reparation [referring to ATA v Jordan]’.

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urgent measures occur at a much earlier stage than normal interim measures, i.e. before

even the tribunal is constituted, renders sovereignty concerns even greater.

3. Emergency Relief: interference or counterweight

Arguing from the host State’s perspective, one could say that obliging a State to act or

refrain from an action from such an early stage constitutes a disproportionate

interference with the State’s sovereignty and regulatory powers arising therefrom. The

question thus, arises ‘Does the EA procedure, indeed, constitute a disproportionate

interference with State sovereignty, or a mere counterweight to States’ regulatory

powers?’. Looking carefully at the unique characteristics of the EA procedure, one can

see that there are more arguments in favor of the latter.

In the JKX v Ukraine case, which was the only and first case where an EA’s award was

put to the enforcement test, one of the arguments Ukraine brought forward before the

national court to resist enforcement was a public policy objection110. It argued that the

EA’s award was contrary to its public policy because ‘it infringed on its authority to

raise royalty taxes, and posed a threat of “material deterioration of the State’s

economy”’111.

The Kiev Court rejected Ukraine’s public policy objection, finding that the only

interests threatened by the award were those of the investors, facing imminent harm

unless they were granted emergency interim relief112. After Ukraine appealed the

court’s resolution granting recognition and enforcement of the EA’s award, the Court

of Appeal revoked the resolution of the first instance court on the basis that the award

would violate Ukraine’s public policy by obliging the national courts ‘to change the

110 Decision of the High Specialized Court of Ukraine for Civil and Criminal Cases: ‘According to part

of article 36 of the Law of Ukraine on International Commercial Arbitration recognition or enforcement

of the arbitral award…may be refused only…2) if the court finds that… recognition or enforcement of

the arbitral award is contrary to the public policy of Ukraine’.

111 Peterson, (n 76)

112 Ibid

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rate of taxes and obligatory payments in contradiction of the Tax Code of Ukraine’ and

thus, in breach of fundamental principles of taxation established in Ukraine113.

Finally, the High Specialized Court of Ukraine for Civil and Criminal Cases remitted

the case to the Court of Appeal, finding that ‘the award does not change the scope of

rights and obligations of the parties, but only temporarily obliges Ukraine to refrain

from imposing the royalty on gas production exceeding 28 per cent’114. The Court of

Appeal upheld the higher Court’s resolution and added that ‘the award neither changes

the taxation system of Ukraine, nor replaces the provisions of the Tax Code of

Ukraine’115.

The JKX v Ukraine case is a good example to examine the compatibility of emergency

interim relief with the principle of State sovereignty and the appropriateness, in general,

of the EA procedure in investment treaty arbitration. The regulatory measure at issue

in that case was a double taxation on gas production, raising the royalty tax rate from

28 to 55 per cent. Taxation constitutes admittedly a public policy purpose of a State and

thus, falls within the ambit of a State’s regulatory powers. It follows from this argument

that a State’s right to change its tax regime and impose taxes on natural and legal

persons under its own jurisdiction is inherent in its sovereign nature. Therefore,

imposing on a State the obligation to refrain from applying its tax laws and regulations

or to amend them could be viewed as an undue interference with the State’s sovereignty.

One could agree with Ukraine’s public policy objection if the EA’s award, ordering

Ukraine to refrain from collecting royalty taxes from JKX exceeding the previous tax

rate, indeed forced the State to change its tax regime or precluded it from applying its

amended regulations. However, paying due attention to the resolutions of the national

113 Decision of the High Specialized Court of Ukraine for Civil and Criminal Cases, (n 89)

114 Ibid

115 Yaroslav Petrov (Asters), ‘JKX vs. Ukraine: An Update on the Enforcement of Emergency

Arbitrator’s Award’, (Kluwer Arbitration Blog, 12 August 2016)

http://kluwerarbitrationblog.com/2016/08/12/jkx-vs-ukraine-an-update-on-the-enforcement-of-

emergency-arbitrators-award/ accessed 13/06/2017

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courts and relying on the EA provisions set out in the SCC Rules, it seems that it is not

the case.

Two main arguments that we can draw from the above to support that emergency

interim relief does not interfere disproportionately with the host State’s sovereignty and

regulatory space, are the provisional character and the case-specific scope of

application of emergency interim relief.

Emergency interim relief has an extremely short lifespan which can hardly speak in

favor of any grave interference with a State’s sovereignty. Although regular interim

measures, i.e. granted during normal arbitral proceedings, are also provisional, the

difference in the limited duration between them and emergency relief lies in quantity.

Under the SCC Rules emergency interim relief remains in force only until the initiation

of arbitral proceedings, that is until the constitution of the arbitral tribunal116. It ceases

to have effect if arbitral proceedings are not initiated within 30 days from the date of

the emergency decision or after 90 days from the same date if the case has not been

referred in the meantime to an arbitral tribunal117. Moreover, the arbitral tribunal, once

constituted, is not bound by the EA’s decision118. Likewise, under the SIAC IA Rules

the EA’s mandate ends once the arbitral tribunal is constituted and the latter has the

power to modify or cancel the EA’s decision which ceases to be effective if the tribunal

is not constituted within 90 days from the date of its issuance119.

116 SCC Rules Appendix II article 1(2): ‘The powers of the Emergency Arbitrator shall be those set out

in Article 32 (1)-(3) of the Arbitration Rules. Such powers terminate when the case has been referred to

an Arbitral Tribunal pursuant to Article 18 of the Arbitration Rules or when an emergency decision

ceases to be binding according to Article 9 (4) of this Appendix.

117 SCC Rules Appendix II Article 9(4): ‘The emergency decision ceases to be binding if: (i) the

Emergency Arbitrator or an Arbitral Tribunal so decides; (ii) an Arbitral Tribunal makes a final award;

(iii) arbitration is not commenced within 30 days from the date of the emergency decision; or (iv) the

case is not referred to an Arbitral Tribunal within 90 days from the date of the emergency decision’.

118 SCC Rules Appendix II Article 9(5): ‘An Arbitral Tribunal is not bound by the decision(s) and reasons

of the Emergency Arbitrator’.

119 SIAC IA Rules Schedule 1 para 10: ‘The Emergency Arbitrator shall have no power to act after the

Tribunal is constituted. The Tribunal may reconsider, modify or vacate any interim order or Award issued

by the Emergency Arbitrator, including a ruling on his own jurisdiction. The Tribunal is not bound by

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Furthermore, emergency interim relief has a very specific and restricted scope of

application, meaning that it applies only in the specific case brought before the EA with

respect only to the specific investor. The beneficiary of that relief is only the aggrieved

party – i.e. the investor - which invoked the EA procedure. Consequently, the relief that

the host State will have to provide, usually injunctive relief, will have effect only on

that investor. The State will not be obliged to change its regulatory regime nor be

prevented from changing its laws in general. On the contrary, it will only be obliged to

refrain temporarily from applying its laws to a specific investor.

Combining these two features of emergency interim relief, i.e. the limited duration and

the limited scope of application, it does not seem plausible to argue that it infringes

State sovereignty to such an excessive extent that it becomes disproportionate,

unreasonable or inappropriate. On the contrary, emergency interim relief is a relief with

a predefined and quite short expiration date and a very specific, one-time application.

Therefore, rather than an undue interference with State sovereignty, such a relief

constitutes a limited and provisional counterweight to State regulatory powers, by

pausing and not stopping the regulatory action of States.

4. An a fortiori argument

In addition, comparing the three different types of non-pecuniary measures –

emergency, interim and final – on the basis of duration, we can see that they affect a

State’s sovereignty to different extents.

Contrary to emergency relief, the duration of interim or provisional measures ordered

by the arbitral tribunal, although it rests on the tribunal’s discretion, ends with the end

of the arbitral proceedings. That means that interim measures remain in force until the

arbitral tribunal decides to modify or revoke them but in any case, until the tribunal

the reasons given by the Emergency Arbitrator. Any interim order or Award issued by the Emergency

Arbitrator shall, in any event, cease to be binding if the Tribunal is not constituted within 90 days of such

order or Award or when the Tribunal makes a final Award or if the claim is withdrawn’.

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renders a final award120. Thus, interim relief granted by an arbitral tribunal can last a

very long time, even as long as the whole arbitral proceedings, ranging from months to

years, since a final award can take months or usually years until it is issued121.

Consequently, in case of interim measures ordered by an arbitral tribunal, the

interference with the host State’s sovereignty is a longer one and thus, greater compared

to emergency interim relief. All the more reason, non-pecuniary relief when granted in

a final award interferes with State sovereignty to an even greater extent, as explained

above, because of its own final or permanent nature in contrast with the provisional

character of emergency and interim relief.

Therefore, since non-pecuniary measures are, at least in principle, acceptable as a final

relief, and interim relief already is provided for in almost all international and national

arbitration rules, one could make an a fortiori argument that emergency relief should

also be accepted because it interferes with a State’s sovereignty to a much lesser degree

compared to final or interim relief. Nevertheless, as Maxim Osadchiy suggests, a

request for non-monetary relief, including emergency relief, should be weighed

carefully and an EA as any arbitral tribunal needs to be wary when ‘asked to curb the

exercise of sovereign powers’ and ‘should not impose their will on State authorities,

nor “place an unfair burden on the Government”’ 122. This is where the standards for

granting (emergency) interim relief come into play.

120 Gabrielle Kaufmann-Kohler and Aurélia Antonietti, ‘Interim Relief in International Investment

Agreements’, in Katia Yannaca-Small ed., Arbitration Under International Investment Agreements : A

Guide to the Key Issues, (OUP 2010), 546 : ‘by nature, interim relief is temporary but the duration of the

validity of the measure can extend over the entire duration of the proceedings’.

121 Demirkol (n 100), 410-411: ‘investment cases that are successful in merits take more than half a

decade before a final award has been reached’.

122 M. Osadchiy (n 12), 248 referring to cases Plama Consortium Ltd. v. Republic of Bulgaria, Order,

ICSID Case No. ARB/03/24, para. 43 (ICSID, 6 Sept. 2005) and Railroad Development Corp. v.

Republic of Guatemala, Decision on Provisional Measures, ICSID Case No. ARB/07/23, para. 36

(ICSID, 15 Oct. 2008)

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5. Standards as a ‘safety valve’

An additional argument speaking in favor of the proportionality of emergency interim

relief in the context of investment treaty arbitration is the test an EA runs to determine

whether the standards to grant emergency interim relief have been met. Although

international arbitration rules grant the arbitrators broad powers to issue any type of

measure they deem necessary or appropriate123, they do not specify the standards to be

fulfilled in order to issue these measures, neither for interim nor for emergency relief.

The EAs in the few known emergency investment cases concluded that these standards

consist of: prima facie case, urgency, irreparability or significance of harm, no

prejudgment of the merits and proportionality. The EA in the Evrobalt case reached

this conclusion by using the Model Law as a guide and relying on the standards

prescribed in articles 17-17A for the issuance of interim measures124 but also on article

26 of the UNCITRAL Rules, stating that these standards are ‘substantially

uncontroversial, whether one applies Swedish law…or international law’125. The EA in

the TSIKInvest case also referred to previous SCC cases126 while the one in the

Kompozit case referred to TSIKInvest and Evrobalt cases. Before even applying the

above criteria, the EAs in these cases firstly determined whether they had a prima facie

jurisdiction.

Applying the above standards an EA can satisfy, at least at a preliminary stage, that

emergency interim relief in the particular circumstances of a case will not prejudge the

merits, that it is a necessary and appropriate remedy to address an investor’s imminent

and irreparable/significant harm, that the investor’s harm outweighs the harm that this

123 ICC rules article 28(1): ‘arbitral tribunal may, at the request of a party, order any interim or

conservatory measure it deems appropriate’; SIAC IA Rules article 27.1: ‘The tribunal may, at the request

of a party, issue an order or an Award granting an injunction or any other interim relief it deems

appropriate’, Schedule 1 para 8: ‘The Emergency Arbitrator shall have the power to order or award any

interim relief that he deems necessary…’; SCC Rules article 32(1): ‘The Arbitral Tribunal may, at the

request of a party, grant any interim measures it deems appropriate’, article 1(2) Appendix II: ‘The

powers of the Emergency Arbitrator shall be those set out in Article 32 (1)-(3) of the Arbitration Rules’.

124 Kompozit v Moldova para 65

125 Evrobalt v Moldova para 33

126 TSIKInvest v Moldova para 53 and 63

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emergency relief is likely to incur to the State127 and that the investor has a reasonable

chance of prevailing in the merits of the dispute. Especially the reliance on the

proportionality standard can help an EA to moderate the burdensome character

emergency relief can have on a State’s sovereignty, because it involves a balancing

process of weighing an investor’s urgent need with a State’s regulatory power. By

comparing the potential harm of an investor, if emergency relief is denied, with the

potential harm of a State, if emergency relief is granted, an EA can assure a

proportionate and limited interference with the State’s sovereignty. Consequently, the

standards – i.e. prima facie case, urgency, irreparability/significance of harm and

proportionality – for interim relief can be used by an EA as a safety valve to the risk of

infringing disproportionately or unfairly State sovereignty.

In a nutshell, we observe that emergency relief does not infringe State sovereignty, at

least not to a greater extent than interim or final non-pecuniary relief. Its interference

with States’ regulatory powers is limited in terms of duration and scope of application

while the conditions which need to be fulfilled in order for emergency relief to be

granted can mitigate its burdensome impact.

F. Conclusion

Emergency relief procedure, although initially designed for commercial disputes, has

made its entrance in investment treaty arbitration since 2014. The EA procedure is

available for investment disputes only under the SCC and the SIAC IA Rules and the

number of investment cases where it has been applied so far is limited to only six.

However, despite its limited application and availability, its use in investment disputes

raises some important questions, both procedural and substantial, concerning its

appropriateness for investor-State arbitration.

Admittedly, the EA procedure provides the investor with the quickest and earliest

interim relief he can get when facing urgent harm by the host State’s regulatory

measures, without waiting for the constitution of the arbitral tribunal. It is the speed and

the timing of the EA procedure that renders this procedure so appealing for investors to

127 TSIKInvest v Moldova para 57; Kompozit v Moldova para 91

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invoke but also questionable for its appropriate use in the context of investment treaty

arbitration. The two main questions that the present paper deals with are whether the

EA procedure complies with due process requirements and whether it infringes States’

sovereign regulatory powers.

Regarding due process, given the impressive speed of the EA procedure and the specific

difficulties of a State respondent to defend itself in a swift manner, the paper concludes

that emergency proceedings do not seem to guarantee procedural fairness. The

extremely limited amount of time within which a State has to respond to an EA notice

does not offer a realistic and reasonable opportunity to present its case, but a rather

fictional or illusionary opportunity. Thus, the parties are not treated de facto equally but

the investor seems to be in a practically more advantageous position. This advantage,

albeit consistent with the purpose of ‘a system of judicial review of government

conduct’128, overstretches the initial asymmetry in favor of the investor. Moreover, the

need of the investor for urgent, timely and thus, efficient interim relief cannot

compensate for any lack of due process requirements because an arbitrator’s duty for

due process outweighs its duty for efficiency.

Conversely, regarding State sovereignty the paper reaches a different conclusion. The

limited duration and the limited scope of application of the EA procedure does not seem

to interfere with a State’s regulatory powers in a disproportionate manner. The fact that

emergency relief has a short expiration date and a very case-specific application speaks

against any argument that it infringes States’ sovereignty. On the contrary, despite the

early stage at which it takes place, emergency relief interferes with States’ regulatory

powers in a much lesser degree compared to normal interim measures or non-pecuniary

remedies as final award ordered by the arbitral tribunal, precisely because of the pre-

determined short time it remains into force. Thus, rather than an interference with

States’ regulatory powers, emergency relief resembles more to a counterweight.

Furthermore, the balancing exercise between an investor’s urgent need and a State’s

regulatory space an EA has to perform before granting emergency interim relief, can

moderate the burdensome character the EA procedure has for a State.

128 Thomas W. Walde, (n 61)

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Although it does not offer adequate safeguards of due process, the EA procedure does

not infringe States’ sovereign regulatory powers, at least not more than interim or final

non-pecuniary relief does. Whether emergency proceedings will continue to be applied

at all or even become of a more popular and wider application in future investor-State

disputes is quite early to predict. For EA procedure to be considered an appropriate

mechanism for urgent interim relief in the context of investment treaty arbitration, the

procedure needs to adapt to the unique features of investment treaty arbitration, namely

the features of a sovereign respondent, e.g. by providing for more realistic and

reasonable time limits for respondents, not least for the latter to endorse this type of

procedure129. As it presently stands, the EA procedure is not appropriately designed for

investment disputes and it is certainly not friendly, let alone appealing, for State

respondents, who are likely to resist enforcement of EA awards.

One needs to bear in mind that investment arbitration is a sui generis procedure130 and

‘while using models, procedures, practices and treaties from the area of international

commercial arbitration…is not identical with commercial arbitration’131. Thus, any

procedural mechanisms borrowed from commercial arbitration must first be adjusted

to the special needs of investment arbitration before they can be considered appropriate

for settling investor-State disputes.

129 M. Osadchiy (n 12), 254: ‘the better question, therefore, is not whether emergency relief has a future

in investment treaty arbitration, but rather how the current rules for emergency relief should be adjusted

to take into account the specific features of investment treaty arbitration’.

130 J. Paulsson, ‘Arbitration Without Privity’, (1995) 10 (2) ICSID Review-FILJ, 232-257, 256: ‘this [i.e.

Investment Arbitration] is not a subgenre of an existing discipline. It is dramatically different from

anything previously known in the international sphere’.

131 T.W. Wälde and T. Weiler, ‘Investment Arbitration under the Energy Charter Treaty in the light of

new NAFTA Precedents: Towards a Global Code of Conduct for Economic Regulation’

(2004) 1 (1) Transnational Dispute Management, www.transnational-dispute-

management.com/article.asp?key=31 accessed 16/06/2017

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G. List of cases

• Evrobalt LLC v. The Republic of Moldova, SCC EA Case No. 2016/082

• Griffin Group v. Poland, SCC EA, 2014

• JKX Oil & Gas plc, Poltava Gas B.V. and Poltava Petroleum Company JV v.

Ukraine, SCC EA, 2015

• Kompozit LLC v Republic of Moldova, SCC EA Case No. 2016/095

• Puma Energy Holdings (Luxembourg) SARL v the Republic of Benin, SCC

Case No. SCC EA 2017/092

• TSIKinvest LLC v. Republic of Moldova, SCC EA Case No. EA 2014/053

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