Emergency Arbitration in Romania – The Perilous Path away from Progress

Print Friendly, PDF & Email

Authors: Sorina Olaru and Cristina Badea

“The world turns, Your Reverence, and we must spin with it.” Lord Vetinari in “The Truth” by Terry Pratchett

Introduction

The Emergency Arbitration (“EA” – also used hereinafter for “Emergency Arbitrator”) procedure in Romania is a couple of months short of its 2-year birthday. It now, however, faces a stunted (hopefully, not suspended) growth, following the reasoning of the recent Civil Decision no. 76 of July 25th, 2019 rendered by the Bucharest Court of Appeals (“Decision 76”).

The Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania (“CICA”) was part of the 2017-2018 wave of updates of arbitral institutions’ rules that also encompassed many others, such as ICC Paris in 2017, Singapore International Arbitration Centre (SIAC), with respect to its Investment Arbitration Rules in 2017, Arbitration Institute of the Stockholm Chamber of Commerce (SCC) in 2017, Asian International Arbitration Centre (AIAC) in 2018, Dubai International Arbitration Centre (DIAC) in 2018, Vienna International Arbitration Centre (VIAC) in 2018, German Arbitration Institute (DIS) in 2018.

The new CICA Rules came into force on January 1st, 2018, bringing to light the EA procedure through the 9 articles of Annex II to the Rules. Moreover, Art. 40 of the new Rules provides that parties’ requests for provisional measures or interim relief may be submitted before the filing of a claim on the merits of the case and will be solved by an Emergency Arbitrator, pursuant to the rules laid down in Annex II.

The EA procedure and Decision 76

In this context, Claimant filed a request for provisional measures with an EA under the CICA Arbitration Rules of 2018, requesting the provisional suspension of the effects Respondent’s Contract Termination Notification’s effects. Respondent did not question the applicability of the EA rules, nor the competence of the EA to arbitrate the provisional measures request.

The order issued by the EA in favor of Claimant, granting the provisional measures, was subsequently set aside by the Bucharest Court of Appeals due to an alleged violation by the CICA Rules of public policy and imperative procedural norms.

As such, Respondent filed with the Bucharest Court of Appeals a request for annulment of the order, relying on an alleged infringement of imperative legal provisions. Respondent argued that Claimant’s request for provisional measures could have only been filed before the national courts and that such request could have been solved by arbitration only if a request on the merits were filed before an arbitral tribunal.

The Bucharest Court of Appeals rendered Decision 76 whereby it annulled the EA Order, concluding that Art. 40 (3) of the CICA Rules and Annex II, that provide for the Emergency Arbitration procedure, infringe upon the imperative provisions of public policy under the Civil Procedure Code, which allegedly grant national courts exclusive jurisdiction to hear requests for provisional measures and interim relief prior to the start of an arbitration.

In order to render the Decision, the judge found, in short, that:

  • Parties are generally free to establish procedural rules for the conducting of an arbitration, as long as they do not contradict imperative legal provisions or public policy.
  • 585 of the Romanian Civil Procedure Code establishes the jurisdiction to hear requests for provisional measures or interim relief as such:
    • 585 (1) – before or during the arbitration procedure, the competent court to hear such requests is the national tribunal in whose jurisdiction the arbitral tribunal is seated;
    • 585 (4) – during the arbitration procedure, such requests can be heard also by the arbitral tribunal.

Based on these provisions, it is clear that the will of the legislator was to exclude the competence of the arbitral tribunal to hear requests for provisional measures or interim relief before the start of an arbitration. If the legislator also wanted to provide an arbitral tribunal with the competence to hear such requests, it would have included an express provision in this regard.

  • 585 is an imperative provision, as it establishes limits between courts’ and arbitral tribunals’ jurisdictions.
  • 40 (3) and Annex II of the Rules infringe upon Art. 585 of the Romanian Civil Procedure Code and, as such, are illegal.
  • In consequence, the EA wrongfully rejected the inadmissibility objection and, consequently, the Court admitted the request for annulment, annulled the EA Order, admitted Respondent’s inadmissibility objection and rejected Claimant’s request as inadmissible.

We strongly disagree with both the solution and the reasoning of the Bucharest Court of Appeals.

Preliminary comments

However, before presenting in a nutshell the reasons for which we find the solution of labeling the EA procedure as unlawful more than debatable, there are a few other flaws of this Decision.

As such, Decision 76 seems to indicate that Respondent did not rely on the supposed illegality of the EA procedure in relation to public policy or imperative procedural provisions as grounds for the annulment request. However, from the Decision, it appears that the Court considered this ground for annulment when rendering the decision and drafting its reasons, without contradictory debates between the parties.

On the one hand, if that were indeed the case, the Court may not have respected essential civil procedure principles in trying the case, in particular, the principle of adversarial proceedings.

On the other hand, if in reality the Court respected these principles and this aspect of alleged illegality of the EA procedure in relation to public policy was indeed discussed, then the problem resides with the drafting and reasoning of the Decision. Either way, the provisions of the Romanian Civil Procedure Code were one way or another ignored.

Furthermore, even if the judge’s reasoning were correct and courts had exclusive jurisdiction to grant pre-arbitral provisional measures/interim relief, in our view the issue would be one of arbitrability or jurisdiction/competence of the emergency arbitrator, and not one of admissibility.

Consequently, the solution rendered by the Bucharest Court of Appeals is at best questionable, even without analyzing the arguments held with respect to the EA procedure as a whole.

Commentary on Decision 76’s conclusions regarding the legality of the EA procedure

Notwithstanding the abovementioned criticism, the most striking aspect of Decision 76 is the judge’s conclusion that the EA procedure should be considered, from the start, illegal and inapplicable, if at the time of its launch, an arbitration is not pending. In our view, the Court’s reasoning is not only incorrect, but also harmful for Romanian arbitration and the development of an efficient private justice system.

As such, Art. 585 of the Civil Procedure Code would only be applicable if neither the parties, nor the designated arbitrators agree on the applicable arbitral procedure, or when the parties did not opt for institutionalized arbitration. This rule is explicitly stipulated under Art. 576 of the Civil Procedure Code and the provision has the purpose of enshrining, together with Arts. 541 and 544, the principle of party autonomy that fundamentally governs arbitration.

Thus, the Court’s conclusion that Art. 585 is an imperative provision or public policy is incorrect.

Moreover, even if Art. 585 were imperative or public policy, which it is not, the interpretation followed by the Bucharest Courts of Appeals is wrong for 3 main reasons.

First, according to Art. 585 (4), “during the arbitration procedure, such requests can also be heard by the arbitral tribunal”. The Bucharest Court of Appeals implicitly considered that emergency arbitration falls outside the scope of this provision and, since the EA procedure is allegedly situated in a timeframe prior to the arbitration procedure, it follows that Art. 40 (3) and Annex II disregard the supposed exclusive national court jurisdiction.

However, there is no reason why the EA procedure would/ should be excluded from the notion of “arbitration procedure”, or why an emergency arbitrator would not be an “arbitrator”. On the contrary, the EA procedure is, similarly to a regular arbitration procedure, based on the arbitration agreement, followed by the nomination of an arbitrator and its acceptance of the mission. Moreover, the order issued by the emergency arbitrator is binding for the parties. This all fits within the definition of an “arbitral tribunal” under Art. 543 of the Civil Procedure Code.

The only argument that could be invoked in order to exclude the EA procedure from the definition under Art. 543 is that the EA’s order is not final, as the arbitral tribunal vested with the judgment on the merits can revise it.

However, in our view and as second argument, courts should pursue an interpretation of these articles in favor of evolution and not be limited by conservative formalism. As such, the fact that an arbitral tribunal vested with the judgment on the merits could revise the interim EA order is an attribute of the tribunal similar to the possibility to analyze court interim orders.

Moreover, there is no reason why parties to an arbitration agreement could have a choice between filing a request for provisional measures with national courts or with an arbitral tribunal, once the arbitration on the merits is pending, but be precluded from such a choice prior to the filing of a claim on the merits, and therefore have an obligation to go to the national courts. At the most, the interpretation of Art. 585 should be in the sense that it establishes a concurrent jurisdiction of the courts and arbitral tribunals, and not an exclusive jurisdiction of the courts.

Art. 585 of the Civil Procedure Code represents the unification of Arts. 3588 și 3589 of the 1864 Civil Procedure Code, that contained the same provisions and that were drafted in 1993. As such, in our view and contrary to the Court’s reasoning, the will of the legislator in 1993 is not necessarily relevant in order to establish its application in 2019.

It is relevant, however, to take into account that in 1993, the EA procedure was probably not something envisioned by the Romanian Civil Procedure Code drafters, and therefore not addressed expressly by the letter of the law.

Moreover, the drafting of the new Civil Procedure Code, in force since 2013, was started in 2006. At that time, even if Art. 585 was not renewed in any way, the intent of the drafters in relation to arbitration was “to turn this alternative dispute resolution procedure into an attractive, flexible and modern one” that would also relieve the national courts of the docket load. This intent is expressed both in Government’s Resolution no. 1527/2007 for the approval of the Preliminary Theses of the Civil Procedure Code Draft, as well as in the reasons set out in the Code’s explanatory memorandum.

The goal of the drafters can only be achieved through an interpretation that takes into account the socio-economic and legal developments in the world and in the country, in order to ensure a fluid interpretation and application of the law.

Third, a correct interpretation of Art. 585 of the Civil Procedure Code must take into account that the EA procedure is developing worldwide and that the most trusted and preferred international arbitration centers provide parties with such a procedure. A comparative law analysis is relevant, considering that both Romanian arbitration and civil procedure look for guidance to the countries that, coincidently, are simultaneously developing the EA procedure.

Conclusions

As the legislator envisioned a modern and flexible ADR procedure, it is important to note that emergency arbitration is arbitration, and that party autonomy is recognized in Romania, as is the subsidiarity of the Civil Procedure Code when it comes to arbitration. There is also no valid principle or reason for the courts to have exclusive jurisdiction to adjudicate requests for interim relief prior to the filing of a request on the merits.

To conclude, neither a correct application of the Civil Procedure Code, nor a correct interpretation of Art. 585 could justify Decision 76. On the contrary, Decision 76 is the result of an overly formal reading of legal texts. All civil law practitioners, counsels, arbitrators and judges, should bear in mind that for an application of legal provisions in line with the constant development of times force us to turn to the basic principles behind laws, the ways they are drafted and how they are meant to be applied. We must also turn to outside inspiration in how new procedures operate in jurisdictions we try to emulate.

“Certain things become easier, but this makes them harder in other ways. We have to change the way we think. We have to move with the times.”  – Lord Vetinari in “The Truth” by Terry Pratchett

Sitemap | Terms and Conditions | Privacy Policy | Cookies Policy | Update your consent

Copyright © 2009-2018 Nestor Nestor Diculescu Kingston Petersen SCA. All Rights Reserved.

NNDKP OFFICES

Bucharest | Timisoara | Brasov | Cluj