Enforceability of Emergency Arbitration Decisions in Moldova

Amid the growing use of emergency arbitration involving Moldova, it is interesting to see whether it is capable of yielding the desired results.

The relatively new concept of emergency arbitration (“EA”) is gaining momentum, with more and more institutions across the globe, such as the Stockholm Chamber of Com-merce (“SCC”), the International Chamber of Commerce (“ICC”) and the London Court of International Arbitration, among others, taking steps to revisit their arbitration rules to embrace the EA mechanism.

Being party to a handful of treaties embedding the SCC Arbitration Rules, the Republic of Moldova has found itself in the EA exposure zone and has already gotten a taste of EA in a number of investor-state disputes (Tsikinvest v. Moldova, SCC Arbitration EA ²⁰¹⁴⁄₀₅₃; Evrobalt v. Moldova, SCC Arbitration EA ²⁰¹⁶⁄₀₈₂; Kompozit v. Moldova, SCC Arbitration EA ²⁰¹⁶⁄₀₉₅).

There is also potential to use EA in the international commercial arbitration setting under the rules of the arbitral institutions featuring EA provisions. In addition, a new arbitral institution is emerging under the roof of the American Chamber of Commerce in Moldova, and it will be interesting to see whether EA will be included in its dispute resolution toolkit.

The EA concept

EA is an expeditious procedure offering conflicting parties who have entered into an arbitration agreement interim relief before the arbitral tribunal is constituted and, under certain arbitration rules, even before the arbitration is commenced. Interim relief is granted by an emergency arbitrator appointed on an urgent basis in order to specifically deal with the application for interim relief. The features of EA vary somewhat from arbitral institution to institution, but share certain core aspects.

The first is the expeditious timeline. As an example, under the SCC Arbitration Rules (2010), an emergency arbitrator is appointed within 24 hours of receipt of the application and an emergency decision is rendered within five days of referral to the emergency arbitrator.

The second aspect is the nature of the relief sought. Emergency relief is provisional in nature and is sought to protect the claim in the underlying dispute. The interim measure can be aimed at maintaining or restoring the status quo, at preserving assets and/or evidence pending final adjudication. Unlike the provisional measures ordered by a state court, the effect of the interim measures granted by an emergency arbitrator is limited to the parties to the arbitration agreement and generally may not bind third parties. For ex-ample, an emergency arbitrator’s decision may not bind a third party bank, thus limiting the effectiveness of a freezing order on a bank account.

The third aspect relates to the circumstances justifying the relief. Besides the prima facie reasonable possibility to succeed on the merits, the applicant must generally prove that it faces imminent and irreparable or substantial harm if no urgent relief is granted. Whether the threshold is met or not shall be decided on a case-by-case basis. Notably, under the same fact pattern, emergency arbitrators may come to opposite conclusions. For instance, applications for emergency relief in Evrobalt v. Moldova and Kompozit v. Moldova originated from the same actions of Moldovan authorities aimed at the divestiture of shares held by a number of investors in a Moldovan bank. While the Kompozit emergency arbitrator established that the tests of urgency, imminence and irreparability were satisfied and ordered the Moldovan state to refrain from taking any further steps relating to the cancellation of the bank’s shares, in Evrobalt LLC v. Moldova the emergency arbitrator concluded that the divestiture of shares would not result in irrevocable loss that could be made good by monetary compensation awarded in the main arbitration proceedings, and therefore denied the application.

Potential routes to enforcement in Moldova

Decisions by an emergency arbitrator generally take immediate effect and are binding on the parties concerned. As statistics of various institutions shows, percentage of voluntary compliance with EA decisions is relatively high. This is because respondents usually want to create a good impression with the future arbitral tribunal. But these statistics are of little use to those claimants whose opponents choose not to comply. Available enforcement options are then on the table and they in turn depend on the origin of the EA decision (Moldovan or foreign).

The concept of EA cannot be found in Moldovan law. Pursuant to the Moldovan Arbitration Act ²³⁄₂₀₀₈, in the course of arbitration, an arbitral institution may order interim relief which can be enforced through a public court, if necessary. Since relevant jurisprudence on EA is lacking, it can only be assumed that the enforceability of domestic EA decisions will largely depend on whether they are deemed to be issued by an arbitral institution.

If an EA decision is imported from overseas, its enforceability is determined under the treaties to which Moldova is a party or according to the principle of reciprocity.

Moldova is one of 156 state parties to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (the “NY Convention”). The is-sue of whether foreign EA decisions are enforceable under the NY Convention is widely debated. On the one hand, the proponents of enforcement, including courts in certain jurisdictions, assert that such decisions terminate the dispute over provisional measures, thus passing the finality test and being enforceable. On the other hand, the predominant view, which is also in line with the Moldovan Supreme Court’s explanatory decision of 25 April 2016 with regard to arbitration decisions on interim measures, is that an emergency arbitrator’s decision lacks the finality required under the NY Convention, since the issue can be reopened and revised in the main arbitration. Accordingly, the chances of EA decisions being enforced under the NY Convention are slim.

By virtue of international treaties, however, Moldova must enforce not only foreign arbitral awards, but also other types of arbitral decisions rendered abroad. While incorporating certain arbitration rules into its treaties, Moldova undertook to put the resulting arbitral decisions into practice. Thus, in line with the approach used in neighbouring Ukraine,¹ treaty-based EA decisions (eg rendered under the SCC rules) should also be enforceable in Moldova; it is, however, for the Moldovan courts to pronounce on the issue. So far, out of the above three SCC EA decisions, in Tsikinvest and in Kompozit, emergency arbitrators decided in favour of investors. However, there is no information on attempts to enforce EA decisions through the Moldovan courts. It appears from publicly available information that Tsikinvest so far failed to pursue its claim in the main arbitration, while notwithstanding the EA decision in Kompozit, the investor’s shares in the Moldovan bank were annulled, new equivalent shares were issued and, as of the beginning of October 2016, were put up for sale.

As for foreign EA decisions made outside the umbrella of international treaties, which the Claimant cannot enforce on the basis of the NY Convention, the creditor may try to re-quest the Moldovan court to issue an equivalent interim relief order using the EA decision as an authoritative document. Nevertheless, it will be up to the court to assess the persuasiveness of the conclusions drawn by the emergency arbitrator.

Some suggestions

Being another attractive tool at the claimant’s disposal, EA has its own bottleneck – the enforceability of the resulting decisions. In order to make EA more sustainable, the Moldovan legislator should recognise it and pave the way for the enforcement of both domestic and imported EA decisions. In the meantime, the Moldovan Supreme Court should explain to the lower courts that the interim measures ordered by arbitrators and emergency arbitrators domestically are on equal footing and thus equally enforceable, and that foreign treaty-based EA decisions also have a pathway to enforcement in Moldova. Finally, in order to spur voluntary compliance with EA decisions, the contracting parties should consider incorporating punitive damages provisions in their arbitration clauses; such provisions are triggered if a party fails to comply. By the same token, arbitral institutions should grant emergency arbitrators the power to set a penalty for non-compliance, while in both cases the arbitral tribunals should subsequently incorporate the accrued penalties in their final awards.

Being another attractive tool at the claimant's disposal, EA has its own bottleneck – the enforceability of the resulting decisions.

1

Resolution of the Kyiv City Court of Appeal dated 17 May 2016, Case no. 757/5777/15‑ц, http://sccinstitute.com/media/145837/appeal-court-decision_17052016_eng.pdf.