Investor-State Emergency Arbitrator Award Enforced
An investor-State emergency arbitrator award was enforced by a domestic court in Ukraine, as was initially reported by the Global Arbitration Review. This decision is interesting since it is the first known enforcement of an emergency arbitrator award against a State.
Emergency arbitrator awards are non-binding on an arbitral tribunal, but remain in place until an award is rendered, in order to prevent additional harm to a party or to provide another urgent measure of relief.
The particular emergency arbitrator award was rendered on the basis of the Stockholm Chamber of Commerce Arbitration Rules, whose Appendix II provides for an emergency arbitrator procedure:
EMERGENCY ARBITRATOR
Article 1 Emergency Arbitrator
(1) A party may apply for the appointment of an Emergency Arbitrator until the case has been referred to an Arbitral Tribunal pursuant to Article 18 of the Arbitration Rules. (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.
The emergency arbitrator award was brought by the Pechersk District Court of Kiev, upon an application by the company JKX Oil & Gas and two of its subsidiaries against Ukraine. The award ordered Ukraine to stop imposing royalties over a certain percentage on subsidiaries’ gas production.
It appears that Ukraine did not take part in the emergency arbitrator procedure and instead chose to attempt to resist its enforcement in domestic courts, where it argued improper notification and a denial of the opportunity to present its case, as well as arguing that the cooling-off period under the Energy Charter Treaty had not been respected and raising public policy objections.
The Ukrainian judge found that Ukraine had proper notice and found in favor of the investor. While there is a suspensive appeal that is taking place with respect to this lower court judgment, it can be difficult for local courts to enforce awards against the countries where they are based, which speaks highly of the independence of Ukraine’s judiciary.
A copy of the decision is available below.