Typically, Parties undergoing disputes submit Ex Parte applications if they anticipate that giving notice could defeat the purpose of the application (for example, freezing injunctions or search orders). While Ex Parte applications are accepted by most Courts, its still fairly untrod territory during Arbitration/s.
It is not uncommon that, during the course of an arbitration, a party may need to obtain urgent interim measures from a Court, such as freezing orders, where an element of surprise is required in order to make the order effective. This usually means that an application has to be made to the court on an ex parte basis, to avoid alerting the counterparty to the protective measures requested, and thereby giving them an opportunity to expedite the dissipation.
In cases where parties have agreed to arbitrate disputes, and arbitration has commenced, question are raised as to whether the affected party can bring an Ex Parte application in the arbitration proceedings for interim relief (as opposed to a Court who may be reluctant to address a matter which is pending before a Tribunal from a jurisdiction point of view), and whether the Arbitrator has the discretion to allow such application to be brought on an Ex Parte basis (as would a Court)?
Our submission in this Article is that Tribunals should consider accepting applications as Ex Parte in appropriate circumstances, as this is not prohibited, although rare in Arbitrations. As an example, the below facts refer to a real case scenario which would have been ideal for an Ex Parte application; however, the Ex Parte application was rejected as the proceedings were based on the 2007 DIAC Rules which in Article 3.2 stipulates that all parties must be notified of “any and all correspondence”.
It is common for most institutional Rules and best practice in International Arbitration to impose a prohibition on any ex parte communications with the tribunal for purposes of transparency. However, what if someone who wants to seek urgent, Ex parte injunctive relief against asset dissipation or something similar stands to do, if an Ex Parte application will not be entertained after a tribunal has been constituted?
THE DISPUTE
MHLF is representing a US-headquartered subcontractor in a local construction matter. While the Arbitration was ongoing, the Respondent/main contractor made a call on the performance guarantee despite the pending dispute between the parties before DIAC.
Upon receiving the notification from the bank, the Claimant/sub-contractor brought an application to freeze the performance bond on an Ex Parte basis, as the Claimant/sub-contractor had a legitimate fear that should the Respondent/main contractor be notified of the application, it will make accelerated efforts to encash the performance bond.
The Tribunal, consisting of a Sole Arbitrator, did not accept the Ex Parte application. The Sole Arbitrator rejected the Ex Parte application on the basis that in Arbitrations under the 2007 DIAC Rules, it explicitly referenced that all parties must be notified of any and all correspondence (see below). Subsequently, the Application was brought inter partes.
As expected, and due to the notification to the Respondent/main contractor of the Application, the Respondent/main contractor accelerated their efforts to encash the performance guarantee.
As a result of the Application not being as Ex Parte, a chain of events was set off including long and costly submissions including oral hearings before the Tribunal. The time delay allowed the Respondent/main contractor to encash the performance bond and to distribute the monies, which in turn, put the Claimant/sub-contractor in a stance of uncertainty and loss. Although an Order was eventually made for the Respondent/main contractor to return the monies (to restore the status quo), it has off course, not done so and prospects of such return is weak.
EX PARTE APPLICATIONS
General Position
Ex Parte is a Latin phrase which means; ‘by or from one party’, meaning that proceedings are conducted without any notice to the other party/s which will be affected by the proceeding. Usually, these proceedings are only granted when the application is urgent and notification of said application may affect the process of the application.
In some jurisdictions and forums these applications will typically not be granted, due to procedural fairness and transparent proceedings. That being said, certain forums in the UAE acknowledge and allow applications without notice and they are becoming embodied in federal laws and arbitral rules.
Dubai Courts:
In Civil Procedure, motions can be granted without a response from the other side. Although there is no set concept of interim or injunctive relief available in the Dubai Courts, to be able to attain a precautionary attachment on assets, an application can be made and heard by the court on an Ex Parte basis, these measures are typically heard in a 24-48 hours’ time frame from the time the submission is made.
In order for a successful precautionary application to be made, the requirements which must be met are that there must be valid documents which support the claim, there also must be an immediate risk that the person submitting the claim believes that any money owed is at risk to not be able to recover any funds.
UAE Federal Law
Although the UAE Arbitration Law No. 6 of 2018 (“UAE Arbitration Law��) does not allow for Ex Parte applications, it does allow for interim relief. Article 18 of the UAE Arbitration Law states:
“Subject to the provisions of Article 18 of this Law, and unless otherwise agreed by the Parties, the Arbitral Tribunal may, at the request of a party or on its motion, order any party to take such interim or conservatory measure as the Arbitral Tribunal may consider necessary given the nature of the dispute […]”.
Arbitration – DIAC 2007
A cornerstone of arbitration, which makes it a preferred dispute resolution method for inter alia construction agreements is the due process and fairness which is expected to be afforded by an arbitrator during proceedings.
That being said, the DIAC 2007 rules Article 3.2 provide that:
“Any notice, documentation, or other communication submitted by any party to the Centre shall be sent in several copies equal to the number required to provide one copy for each arbitrator, one copy for the other party or parties, and one for the Centre until the Tribunal is constituted.”
This provision often renders arbitrators unwilling to consider applications without notice. Although not explicitly prohibited, the reference to communications being sent to the other party is enough to worry an arbitrator that he may be breaching his duties of impartiality.
Often, arbitration rules remain silent regarding ex-parte applications, rather, they leave it to the arbitrator’s discretion to decide whether or not an application should be without notice, nonetheless, the 2022 DIAC rules now explicitly provide that:
“The party applying for an interim measure shall also:
(a) satisfy the Tribunal of the reasons why it believes that providing notice to the other party may jeopardize the efficacy of the application [ ]…”
2022 DIAC Rules (and Annexures) on Ex Parte Applications
The long-awaited update of the UAE Arbitration Law along with the new DIAC 2022 rules, both mimic the UNICTRAL Model Law, demonstrating the keenness of the UAE to become more appealing for international disputes in terms of both laws chosen and institution.
The DIFC Arbitration Law 1 of 2008 in Article 24 expressly provide for interim measures and contains a more detailed description and extensive provisions relating to interim measures. The revamped 2022 DIAC Arbitration Rules similarly to the DIFC Arbitration Law contain in Appendix II, the rules further set out when an interim measure may be granted, Article 1.2 of Appendix (II) provides that a tribunal may order without limitation an interim measure that allows parties to submit applications that;
(a) “maintain or restore the status quo pending determination of the dispute;
(b) take action that would prevent, or refrain from taking action that is likely to cause;
(i) current or imminent harm; or
(ii) prejudice to the arbitral process itself.”
Article 1.11 in Appendix II of the 2022 DIAC rules explicitly allows for interim relief issued without any prior notice, so long as the party against whom the order is issued against can reply once the preliminary order is issued as an attempt to set it aside.
Furthermore, the new 2022 DIAC rules removes the obligation of Article 3.2 in the 2007 rules mentioned above, making the obligation for any and all communication to be shared between all parties, redundant.
That being said, the requirements which must be proved in Appendix II are complex. For urgency to be present, a party must prove that the interim relief cannot wait for the issuance of the final reward, and that not granting an Order, the applicant party will suffer irreparable harm. Imminent harm is a standard of a seriousness of harm, which can be viewed as irreparable, serious or substantial injury if the relief is not granted.
The ICC rules, LCIA Rules, UNICTRAL Rules, SIAC Rules, and ICSID Convention all contain the ability for interim relief, or the concept of emergency arbitrators, while all in some way requiring the standard of urgency to be present for such immediate relief to be granted.
Nonetheless, although the requirements referenced can arguably be viewed as vague and difficult to prove, Article 1.11 in Appendix II DIAC 2022, explicitly allows for applications without notice, arguably making the new DIAC rules more favourable in future Arbitrations.
International Arbitration Guidelines[1]
Article 7 of the Guidelines specifically provides for Ex Parte applications, and it states that –
- Interim measures can be granted either ex parte or after receiving submissions from both parties.
- Interim measures granted ex parte are subject to further review pending an inter partes
In the commentary to Article 7, various recommendations are made, inter alia:-
- In cases of extreme urgency or where an element of surprise or confidentiality is required to make the order effective, it may be appropriate for arbitrators to grant an interim measure on an ex parte basis, i.e. without notice to the party against whom the measure is sought and hearing initially submissions only from the party making the application, so long as it is not prohibited under the arbitration agreement.
- Arbitrators should be satisfied (1) that all the criteria applicable to interim measures generally are present and additionally (2) that the disclosure of the application to the other party may well frustrate the purpose for which the relief is sought and render it, if granted, ineffective.
- When granting interim measures on an ex parte basis, arbitrators should emphasize that any such measure is provisional in that it is effective only for a limited time and pending the hearing of all parties. This stresses the temporary nature of any ex parte measure granted and serves to remind the parties that arbitrators may decide that it is appropriate to modify, suspend or terminate any provisional measure once they have heard from the opposing party at an inter partes
Therefore, it appears that if these recommendations are applied, any prejudice linked to the non-notified party can be managed while at the same time protecting the rights of the Applicant to seek the relief.
CONCLUSION
There is little doubt that arbitrators have the authority to grant interim measures. They are generally given very broad powers to grant any interim measure they consider necessary and/or appropriate in the circumstances of the case before them, specifically since they ‘have discretion to adopt procedures it considers necessary”.
Nevertheless, numerous issues arise concerning the nature of the relief arbitrators may grant as well as its form and effectiveness, especially in the circumstances where for practical reasons, an Application should be Ex Parte to have the necessary effect.
Hopefully, due to the amended 2022 DIAC Rules, at least parties who chooses this institution will now have access to interim measures on an Ex Parte basis, in appropriate circumstances.
Even better, and in order to reserve a party’s right to and Ex Parte application, contracting parties could include wording in their arbitration agreements to make it clear that they agree that urgent applications for interim measures, can be brought Ex parte.
Written by:
Marianne du Toit – Of Counsel Arbitration
Rand Hashim – Junior Associate
[1] International Arbitration Practice Guideline, Applications for Interim Measures. Prepared by Practice and Standards Committee of Chartered Institute of Arbitrators, UK, London. Last revised 29 November 2016.