IN THE MATTER OF AN ARBITRATION BEFORE A TRIBUNAL
CONSTITUTED IN ACCORDANCE WITH APPENDIX II OF THE 2017
ARBITRATION RULES OF THE ARBITRATION INSTITUTE OF THE
STOCKHOLM CHAMBER OF COMMERCE
ZAZA OKUASHVILI
(Claimant)
v.
REPUBLIC OF GEORGIA
(Respondent)
19 July 2019
Emergency Arbitrator:
Mr. Bernardo M. Cremades
1. Emergency Arbitrator's Analysis .............................................................. 12
3. Emergency Arbitrator's Analysis .............................................................. 14
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This Award on Emergency Measures is issued in the SCC Arbitration EA 2019/120 pursuant to Appendix II (Emergency Arbitrator) of the Arbitration Rules of the Stockholm Chamber of Commerce of 2017 (the "SCC Rules"). Article 1.1 of Appendix II of the SCC Rules provides that:
"A party may apply for the appointment of an Emergency Arbitrator until the case has been referred to an Arbitral Tribunal pursuant to Article 22 of the Arbitration Rules."
1. The emergency proceedings were commenced by the Claimant, Mr. Zaza Okuashvili (the "Claimant") by a letter to the SCC dated 15 July 2019. In such letter, Claimant relied on the arguments contained in his "Application for the Appointment of an Emergency Arbitrator and for Interim Measures," dated 22 March 2019, submitted pursuant to Article 2 of Appendix II of the SCC Rules (the 15 July 2019 letter and 22 March 2019 Application together referred to herein as the "Application"). The Application was served by the SCC on the Respondent, the State of Georgia ("Respondent" or "Georgia")) (jointly and together with the Claimant to be referred to as the "Parties," and individually as "Party"), on 16 July 2019, pursuant to Article 3 of Appendix II of the SCC Rules.
2. The Emergency Arbitrator was appointed by the Board of the Arbitration Institute of the SCC (the "Board") on 16 July 2019, pursuant to Article 4 of Appendix II to the SCC Rules. The Emergency Arbitrator's details are as follows:
Mr. Bernardo M. Cremades
Goya 18, 2°
Madrid, 28001
Spain
Tel: +34 914 237 200
Email: [email protected]
3. Pursuant to Article 8 of Appendix II to the SCC Rules, the Emergency Arbitrator has five (5) days from the date the Application is referred to the Emergency Arbitrator to render a decision.
4. The seat of the arbitration is governed by Article 5 of Appendix II of the SCC Rules, which provides:
"The seat of the emergency proceedings shall be that which has been agreed upon by the parties as the seat of arbitration. If the seat of the arbitration has not been agreed by the parties, the Board shall determine the seat of the emergency proceedings."
5. By letter dated 16 July 2019, the Board indicated that the seat of this Emergency Arbitration shall be Stockholm, Sweden.
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6. Both Parties have requested that the Emergency Arbitrator render its decision in the form of an Award.1
7. The Claimant is represented in these emergency proceedings by:
Mr. Colin Gibson
Mr. Joshua Fellenbaum
Fieldfisher LLP
Fiverbank House
2 Swan Lane
London EC4R ETT
UK
T: +44 020 7861 4000
[email protected]
[email protected]
Mr. Lucas Bastin
Ms. Jackie McArthur
Essex Court Chambers
24 Lincoln's Inn Fields
London WC2A 3EG
UK
T: +44 020 7813 8000
[email protected]
[email protected]
8. Respondent is represented in these emergency proceedings by:
Prof. Emmanuel Gaillard
Dr. Yas Banifatemi
Dr. Paschalis Paschalidis
Shearman & Sterling LLP
7, rue Jacques Bingen
75017 Paris
France
[email protected]
[email protected]
[email protected]
9. On 16 July 2019, the Emergency Arbitrator issued Procedural Order No. 1.
10. At 21:39 CEST on 17 July 2019, Respondent submitted its Answer to Claimant's Application.
11. At 13:52 CEST on 18 July 2019, Claimant filed its Reply.
1 Claimant's 15 July 2019 letter; Respondent's Answer. ↩
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12. At 20:01 on 18 July 2019, Respondent filed its Comments to Claimant's Reply
13. The following summary does not intend to be an exhaustive summary of all of the factual allegations in dispute and the history of the dispute between the Parties to date. Given the urgency of the Application, this summary intends to recount the main factual issues at hand as presented by Claimant.
14. As is known by the Parties, the issues at hand have been considered by a previous Emergency Arbitrator (Mr. Fredrik Andersson) in an Award dated 2 April 2019 (the "2 April Award"). While that Award is not binding on the Emergency Arbitrator here, and independent analysis will be provided for the issued to be addressed, Mr. Andersson did an admirable job summarizing Claimant's position in the previous emergency proceedings. Because Claimant did not file a new brief with his Application and instead merely relied on his 22 March Application, those claims remain the exact same. Therefore, Mr. Andersson's accurate depiction of them will be repeated here to a large extent.
15. According to the Application, Claimant, Mr. Zaza Okuashvili, is a national of the United Kingdom and the Republic of Georgia. He is the ultimate beneficial owner of a group of companies (the "Omega Group"). Claimant indirectly owns four companies established under Georgian law:
16. Claimant also indirectly owns 70 per cent of the shares in Iberia TV ltd, which is a company established under Georgian law that operates a national TV network in Georgia.3
17. According to Claimant, Respondent has exposed Claimant to several wrongdoings, namely by:
2 2 April Award, para. 33. ↩
3 2 April Award, para. 34. ↩
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18. As a result of the aforementioned measures, OGT is said to have sustained heavy losses, resulting in OGT being unable to pay its tax liabilities. As of October 2018, OGT's outstanding tax liabilities amounted to 52,995,509.15 Georgian Lari ("GEL"), which amounted at the time to roughly USD 19,774,400. No detailed explanation with respect to how the outstanding tax liabilities arose, or how the aforementioned measures are connected to OGT's inability to fulfill its fiscal obligations, have been provided by Claimant. For the purpose of these proceedings, Claimant does not contest the amount of the initial tax liabilities, only the manner in which the enforcement of such liabilities occurred.5
19. On 24 March 2017, the Georgian Revenue Services (the "Revenue Services") issued an attachment order against OGT, in order to ensure payment for overdue tax liabilities. As Claimant has given a personal guarantee for OGT's tax liabilities, some real estate belonging to Claimant was also attached.6
20. On 25 April 2017, OGT filed an application with the Ministry of Finance for the deferral of its tax liability. Such application shall according to Georgian law be referred to a specialist commission for consideration. No such consideration of the application has occurred to date.7
21. On 25 April 2018, the Tbilisi City Court approved the attachment and ordered that the attached property could be compulsorily sold.8 Claimant appealed this decision to the Tbilisi Appeals Court. On 19 July 2018, the Tbilisi Appeals Court confirmed the previous ruling and again approved the attachment and a compulsory sale order.9 During the same proceedings, OGT and Claimant allegedly requested the courts to intervene on the basis that the property that has been attached and that is subject to compulsory sale allegedly exceeds the value of the tax liability. No such intervention occurred.
22. In October 2018, Claimant contends that the Ministry of Finance proposed to write off parts of OGT's outstanding tax liabilities and to defer the remainder of the tax
4 2 April Award, para. 36. ↩
5 2 April Award, para. 36. ↩
6 2 April Award, para. 37. ↩
7 2 April Award, para. 38. ↩
8 2 April Award, para 39. ↩
9 2 April Award. para. 39. ↩
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liabilities for two years.10 Claimant alleges that such proposal was contingent on Claimant publicly revoking bribery allegations that Claimant had previously made against government figures.11 This proposal was subsequently reneged on by the Revenue Services according to Claimant.
23. On 29 November 2018, the Georgian Ombudsman concluded that Respondent's failure to refer OGT's application to a specialist commission amounted to a breach of OGT's rights and recommended that Respondent transfer OGT's application to such commission and that Respondent summon a meeting to discuss the application.12
24. On 13 December 2018, Claimant notified Respondent about a dispute under the BIT, thereby consenting to arbitration and offering to negotiate an amicable settlement.13
25. On 18 December 2018, the Revenue Services sent a letter to OGT where it offered to partially cancel the forced actions, provided that a partial payment of GEL 1,500,000 was made by OGT.14
26. On 21 February 2019, Claimant received a notice stating that the plot of land belonging to Claimant that had previously been attached had now been seized.15
27. On 22 February 2019, Claimant and OGT received notice from the National Enforcement Bureau ("NEB") that unless the outstanding tax liability as well as additional charges were satisfied within seven days, the attached property would be subject to compulsory sale at auction.16 OGT did not comply with the demand.17
28. On 27 February 2019, the director of OGT met with the bailiffs appointed by the NED who informed him that the process of valuing OGT's property had already begun, in preparation for selling the property at a compulsory auction. OGT was further informed that it would not be given notice of the time and place of the compulsory auction.18
29. On 14 March 2019, another letter was sent by the NED informing that OGT's transport vehicles had been seized, and instructed OGT to immediately present the seized vehicles to the bailiff.19 On 21 March 2019, OGT notified the Tbilisi Bureau of Enforcement that it would place the attached vehicles on a certain place on 22
10 2 April Award, para. 40. ↩
11 2 April Award, para. 40. ↩
12 2 April Award, para. 41. ↩
13 2 April Award, para. 42. ↩
14 2 April Award, para. 43. ↩
15 2 April Award, para. 44. ↩
16 2 April Award, para. 45. ↩
17 2 April Award, para. 45. ↩
18 2 April Award, para. 46. ↩
19 2 April Award, para. 47. ↩
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March 2019. According to Respondent, OGT has failed to do so, and the vehicles are thus still in OGT's custody.20
30. As indicated, this issue was the subject of a previous emergency arbitration. Claimant initiated its original emergency arbitration proceedings on 22 March 2019 which culminated in the 2 April Award.
31. In his 15 July 2019 letter, Claimant indicated that Respondent had submitted to its own courts that the 2 April Award had expired and was no longer binding.21
32. Claimant argued that while it did not accept the claim that the 2 April Award had expired, it wished for the 15 July 2019 letter to constitute its Application for the appointment of an emergency arbitrator under Article 2 of Appendix II of the SCC Rules.22 In doing so, Claimant indicated it wished to rely on its submissions from the previous emergency proceedings.
33. As was the case with the factual summary, the following summaries of the Parties' positions do not intend to be exhaustive summaries of each claim that has been made.
34. Additionally, as above with respect to the factual summary, this section may take portions of the 2 April Award as it concerns summaries of positions that remain identical to those at issue in the 2 April Award.
35. Claimant makes the following assertions.
36. An international tribunal should be reluctant to refuse interim measures on the basis that it does not have jurisdiction over the dispute. Because the test is a prima facie test, the threshold is low.23
37. The dispute at hand concerns two arbitration agreements. They are as follows:
20 2 April Award, para. 47. ↩
21 Claimant's 15 July 2019 letter. ↩
22 Claimant's 15 July 2019 letter. ↩
23 2 April Award, para. 25. ↩
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38. Claimant has been a national of the UK since March 2011. The fact that Claimant is a dual national of both the UK and Georgia does not deprive him of the protection of the BIT. The BIT has no exceptions for dual nationals and there is no reason of language or principle why one should be grafted on.24
39. Claimant has an investment in Georgia, namely his indirect ownership of shares of Georgian companies that are part of the Omega Group. The fact that Claimant's ownership of the Georgian companies is by way of intermediate companies does not prevent it from being an investment under the BIT.25
40. Respondent has consented to have disputes decided under the SCC Rules, by way of the most favored nation ("MFN") clause in Article 3 of the BIT. Article 10(3) of the Belux-BIT gives investors a choice of referring disputes to arbitration before certain institutions, including the SCC. An investor arbitrating under the Belux-BIT thus receives more favorable treatment from an investor under the Georgia-UK BIT. Therefore, the MFN clause in the Georgia-UK BIT operates in a manner that means the Respondent has consented to an investor under the Georgia-UK BIT electing to arbitrate at the SCC instead of at ICSID.26
41. The Georgia-UK BIT was signed and entered into force on 15 February 1995. Everything which will be the subject of the forthcoming claim occurred after that date.27
42. Claimant also notes that the SCC Board has now, on three occasions, found that the SCC has prima facia jurisdiction over the dispute.28
43. Respondent makes the following assertions.
44. Article 8 of the applicable Georgia-UK BIT refers investor-State disputes exclusively to ICSID jurisdiction.29
24 2 April Award, para. 54. ↩
25 2 April Award, para. 55. ↩
26 2 April Award, para. 56. ↩
27 2 April Award, para. 57. ↩
28 Claimant's Reply. ↩
29 Respondent's Answer. ↩
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45. Articles 25(1) and 25(2)(a) of the ICSID Convention prevent investors holding the nationality of the State party to the dispute from resorting to arbitration against that State.30
46. Georgia thus did not consent to arbitration with dual Georgian and UK nationals, as the reference to "nationals" in Article 8 of the BIT does not include such dual Georgian and UK nationals.31
47. The BIT makes no reference to the possibility of SCC arbitration, or arbitration before any forum other than ICSID.32
48. Even if Claimant were covered by the Georgia-UK BIT, Claimant cannot import Respondent's consent to arbitration pursuant to the SCC Rules from the Belux-BIT in order to establish the jurisdiction of the Emergency Arbitrator.33
49. Respondent has not consented to SCC arbitration with UK nationals (via the Georgia-UK BIT), let alone dual UK-Georgia dual nationals, and MFN clauses cannot be used to import consent where none exists.34
50. Because the Georgia-UK BIT does not contain an option for SCC arbitration, neither Georgia nor the UK can be said to have consented to SCC arbitration under the Treaty. Respondent contends that such an allowance would permit Claimant to improperly build a patchwork BIT designed to arbitrate with Georgia without its consent.35
51. It is not in dispute that Claimant is a UK national and thus fits within the definition of a national under Article 1(c) of the BIT. Rather, as detailed more above, Respondent argues that Article 8 of the BIT, by referring disputes to ICSID, has not consented to dual UK-Georgia nationals due to Articles 25(1) and 25(2)(a) of the ICSID Convention.
52. The BIT does not explicitly exclude dual nationals, which it certainly could have. As Claimant has highlighted, the Israel-Georgia BIT, signed approximately four months after the UK-Georgia BIT, contains such an explicit exclusion.36 While this is certainly not dispositive of the issue, it provides support to Claimant's position that the UK-Georgia BIT did not intend to exclude dual nationals.
53. On the other hand, Respondent correctly points out that Articles 25(1) and 25(2)(a) of the ICSID Convention prevent investors holding the nationality of the State party to the dispute from resorting to arbitration against the State. Thus, by explicitly
30 Respondent's Answer. ↩
31 Respondent's Answer. ↩
32 Respondent's Answer. ↩
33 Respondent's Answer. ↩
34 Respondent's 17 July 2019 Answer. ↩
35 Respondent's 17 July 2019 Answer. ↩
36 Claimant's Application, para. 14. ↩
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referring such disputes to ICSID, one could certainly come to the conclusion that the BIT excludes dual nationals such as Claimant.
54. Ultimately, this is not a cut and dry case with respect to jurisdiction and it would be inappropriate for the Emergency Arbitrator to delve deep into this conflict to arrive at a definitive answer as to whether the BIT excludes dual nationals. The prima facie bar here is quite low, and with the BIT's lack of explicit exclusion, the Emergency Arbitrator cannot say that, prima facie, Claimant is not covered by the BIT.
55. With respect to whether the MFN clause permits Claimant to utilize the dispute resolution provisions from the Belux-BIT, there again lacks a clear, definitive answer.
56. While Respondent is correct that Claimant fails to provide any authority definitively establishing that its intended use of the MFN clause in this case is an accepted norm in international arbitration, it is equally true that the opposite view is less than absolute.
57. As Mr. Andersson correctly noted in the 2 April Award, there undoubtedly exists "complexity and controversy relating to the use of MFN provisions to incorporate non-substantive rights into treaties."37 Without clear guidance on the issue, the Emergency Arbitrator is unable to form the conclusion that Claimant's purported use of the MFN clause in this case is, prima facie, invalid.
58. Accordingly, for the purpose of these emergency proceedings, the Emergency Arbitrator finds that Claimant has established prima facie jurisdiction.
59. Claimant has requested that the Emergency Arbitrator grant the following relief:
Claimant's Request 1
59.1. "The Applicant seeks an order prohibiting Georgia (whether acting through the National Enforcement Bureau or otherwise) from transferring to itself title to property and/or selling property owned by the Applicant, including property owned by the following companies that are directly or indirectly owned by the Applicant:
37 2 April Award, para. 104. ↩
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"The prohibition is to remain in place until the resolution of the present dispute by way of a final award on the merits in the envisaged arbitration between the Parties, but in any event in accordance with the provisions of Article 9(4) of Appendix II to the SCC Arbitration Rules 2017."38
Claimant's Request 2
59.2. "Alternatively, the Applicant seeks an order, prohibiting Georgia (whether acting through the National Enforcement Bureau or otherwise) from taking steps to execute the enforcement proceedings decision issued against the Applicant and against LLC OGT by the Tbilisi City Court on 4 October 2018, pending resolution of the present dispute by way of a final award on the merits in the envisaged arbitration between the Parties, but in any event in accordance with the provisions of Article 9(4) of Appendix II to the SCC Arbitration Rules 2017."39
Claimant's Request on Costs
59.3. "The Applicant also seeks an order that Respondent pay the Costs of the Arbitration, including the reasonable costs incurred by the Applicant, in accordance with Article 10(5) of Appendix II, and Articles 49(6) and 50 of SCC Arbitration Rules 2017."40
38 Application, paras. 33-34. ↩
39 Application, para. 35. ↩
40 Application, para. 36. ↩
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60. Article 1(2) of Appendix II to the SCC Rules provides:
"The powers of the Emergency Arbitrator shall be those set out in Article 37(1)-(3) of the Arbitration Rules. Such powers terminate on referral of the case to an Arbitral Tribunal pursuant to Article 22 of the Arbitration Rules, or when an emergency decision ceases to be binding according to Article 9(4) of this Appendix."
61. Article 37(1)-(3) in turn provides:
"(1) The Arbitral Tribunal may, at the request of a party, grant any interim measures it deems appropriate.
(2) The Arbitral Tribunal may order the party requesting an interim measure to provide any security in connection with the measure.
(3) An interim measure shall take the form of an order or an award."
62. As the language above indicates, the SCC Rules provide an emergency arbitrator broad discretion to grant interim measures if warranted by the issues presented in the case.
63. The Claimant's Application considers the necessary requirements for the granting of interim relief to consist of (i) reasonable chance of success on the merits; (ii) irreparable harm or serious or actual damage; (iii) urgency; and (iv) proportionality.41
64. Respondent has indicated that the relevant factors consist of: (i) urgency and irreparable harm; (ii) proportionality; and (iii) reasonable chance of success on the merits.42
65. In the 2 April 2019 Award, the emergency arbitrator appropriately highlighted the requirements set forth in Article 17(A)(1)(a) and (b) of the UNCITRAL Model law on International Commercial Arbitration, as amended in 2006. When combined with the urgency requirement that (i) is indicated in Article 7 of Appendix II of the SCC Rules; (ii) is common practice in emergency, pre-arbitral procedure; and (iii) has been accepted by both Parties here as a requirement for the granting of interim measures, Mr. Andersson arrived at the following list of requirements:
41 Application, para. 53. ↩
42 Respondent's Answer. ↩
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66. While the Emergency Arbitrator considers these requirements to reflect the international norms with respect to the granting of interim measures, the analysis below will, unlike the 2 April Award, treat "urgency" as a standalone factor.
67. In the 2 April Award, the emergency arbitrator chose to deny this request without a detailed analysis each of the respective factors for granting interim measures because the request "clearly does not fulfill the requirements for granting interim relief."44
68. The Emergency Arbitrator here chooses to do the same. Claimant's Request 1 is an overbroad attempt to significantly restrict Respondent from carrying out hypothetical government measures in its attempt to complete standard tax collection duties. Claimant had not alleged in his 22 March Application, and has failed to allege in his Application here (due to the fact the 22 March Application was merely submitted again in its original form), that Respondent is in the process of transferring to itself title to property and/or selling property of the companies listed in Request 1. Accordingly, without any specification concerning any relevant measures on the part of Respondent, Request 1 must again be denied.
69. In order for Claimant to satisfy the urgency prong, Claimant must logically establish, on a prima facie basis, that the actions expected to cause the relevant, irreparable harm would occur before an arbitral tribunal can be constituted and deal with this matter.
70. The interim measures are urgently needed. The procedure for seizing and selling Claimant's property is under way and will continue. The sale could happen at any
43 2 April Award, para. 114. ↩
44 2 April 2019 Award, para. 117. ↩
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time if the interim relief granted in the 2 April 2019 Award is not renewed. Respondent is not obliged under Georgian law to give any further notice to Claimant before his property is sold. Claimant claimed in the 22 March Application that this could have been done at any time from 1 March 2019. If the previously granted interim measures are not granted again now, Claimant will in practice be unable to obtain interim measures at a later point.45
71. Claimant contends that his Application qualifies as sufficiently urgent because the necessary harm is likely to materialize before an arbitral tribunal can be constituted and rule for itself on whether to grant interim measures.46 Claimant alleges that Respondent is in the process of seizing and selling OGT's property and certain property belonging to Claimant. Since the issuance of the 2 April 2019 Award, Claimant alleges that Respondent, on 15 April 2019, requested the Tbilisi City Court "order for selling by auction the property of OGT LTD" comprising "the trademarks and non-material assets ... owned by OGT LTD."47
72. Claimant alleges that the only reason steps have not been taken to advance the compulsory sale since the 2 April Award was issued is because of the effect of that 2 April Award.48
73. Respondent notes that the Revenue Service attached certain assets belonging to OGT in March 2017 in order to enforce OGT's tax liability. These attachments were subsequently approved at first instance (on 25 April 2018) and on appeal (on 19 July 2018). On 4 October 2018, the Revenue Service obtained a writ of execution regarding the attachments approved by the courts. As of today, the NBE has only sought the delivery of OGT's non-core assets and in particular its vehicles.49
74. Respondent further notes that Claimant has continuously chosen not to pursue the possibility of seeking a deferral of enforcement measures under Georgian law, and that Claimant and OGT waited until 20 May 2019 to seek recognition and enforcement of the 2 April Award in Georgia.50
75. Respondent also contends that Claimant waited over a month to file the original emergency arbitration application after OGT received a 20 February 2019 notification concerning the compulsory sale of OGT assets in the case of non-payment.51
45 2 April Award, para. 76. ↩
46 Application, para. 79. ↩
47 18 July 2019 Application. ↩
48 Claimant's Reply. ↩
49 Respondent's Answer. ↩
50 Respondent's Answer, Exhibit R-4. ↩
51 Respondent's Comments. ↩
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76. Finally, Respondent argues that the process to sell the assets covered by the writ of execution dated 4 October 2018 would take months, and thus there is no urgency present.52
77. The Emergency Arbitrator notes that in his Reply, Claimant argues that, "[t]he reason why no steps have been taken to advance the compulsory sale since the April Award was issued, is because of the very existence of the April Award."53
78. However, Respondent highlighted that Claimant did not actually seek recognition and enforcement of the 2 April Award in Georgia until 20 May 2019.54 This fact went unaddressed by Claimant despite indicating a lack of urgency for the almost seven week period between the issuance of the 2 April Award and the seeking of recognition and enforcement. This delay seems to demonstrate a lack of urgency.
79. Further, it suggests that the lack of liquidation of the relevant attached assets is due to factors beyond the 2 April Award, again indicating a lack of urgency.
80. Additionally, the Emergency Arbitrator is troubled by the Claimant's failure to pursue the possibility of seeking a deferral of enforcement measures under Georgian law. Claimant makes two primary arguments in his Application as to why such a failure should not indicate a lack of urgency.
81. First, Claimant previously alleged that the "right" discussed by Respondent is empty because it is not possible to exercise such a right once the compulsory auction of an asset is on foot. Because Claimant alleges that an auction can be announced at any time, he contends that this domestic means of requested deferral would not be effective.55
82. Second, Claimant argues that the deferral of enforcement under Article 263 of the Civil Procedure Code only last for three months and can only be requested/obtained once. Accordingly, Claimant considered this route to provide insufficient protection.56
83. The Emergency Arbitrator is not convinced by these positions. As to the first, Claimant's position in essence is that a request for deferral would not have been effective because, at any moment, his right to request such a deferral would have ceased (once the compulsory auction of the asset "[wa]s on foot"). However, this would suggest that, despite the potential for such a compulsory auction to begin, it had not yet begun and thus this remained an option for Claimant to pursue.
52 Respondent's Comments. ↩
53 Claimant's Reply. ↩
54 Respondent's Answer, Exhibit R-4. ↩
55 Claimant's 30 March 2019 Response, para. 29. ↩
56 Claimant's 30 March 2019 Response, para. 29. ↩
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84. As to Claimant's second point, the Emergency Arbitrator is not convinced that Article 263's limited deferral period rendered it ineffective. It is of course true that Claimant could have theoretically obtained the three-month deferral only to see it expire with the Claimant still in a position of needing protection from enforcement. If that had occurred, Claimant could have then sought the interim relief it sought in March, and now seeks, to provide further protection. In doing so, Claimant could have then highlighted that the alleged urgency of the situation caused him to first promptly pursue those domestic remedies.
85. For the reasons discussed above, the Emergency Arbitrator finds that the Claimant's Application lacks the necessary urgency for the interim measures in Request 2 to be granted.
86. Because the Emergency Arbitrator finds that the Application lacks sufficient urgency, the remaining factors (irreparable harm, proportionality, reasonable chance of success on the merits) are now moot and will not be analyzed.
87. However, factors beyond these traditional elements are relevant to the Emergency Arbitrator's decision and will now be discussed separately.
88. Respondent correctly points out that the issues in these emergency proceedings concern a sovereign State's legitimate exercise of its tax collection process, in this case to collect taxes that Claimant acknowledges are owed. An Emergency Arbitrator should be quite hesitant in exercising its authority with respect to such sovereign powers. In doing so, an Emergency Arbitrator risks overstepping the reasonable boundaries of such arbitration proceedings and inappropriately undermining such sovereign authority.
89. In this case, Claimant seeks to continue restrictions on Respondent's sovereign powers of tax collection for an extended period of time. The Emergency Arbitrator is of the opinion that the bar is raised when dealing with emergency actions sought in relation to such fundamental government authority.
90. On a similar note, the Emergency Arbitrator is concerned with the prospect of permitting a potential abuse of the emergency arbitration proceedings by merely prolonging interim measures that have since expired through what would amount to a simple renewal. The nature of emergency arbitration proceedings is indicated by the name itself – to review requests for emergency, short term relief that may be necessary before an arbitral tribunal can be constituted. The risk of abuse is heightened when such a renewal is sought in relation to the fundamental sovereign rights of a State.
91. Here, Claimant succeeded in obtaining such relief in the 2 April Award. Such relief was valid for 90 days. Claimant contends that he should not be penalized for the expiration of the 2 April Award because the delay in the constitution of the arbitral tribunal was due to Respondent's failure to pay its share of advanced costs.
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92. However, Claimant should have been aware of the duration of the relief obtained in the 2 April Award and could have posted Respondent's share of advanced costs in sufficient time to constitute an arbitral tribunal before the 2 April Award expired, or at least make the timely constitution of such the tribunal significantly more likely. In noting this, the Emergency Arbitrator offers no opinion on Respondent's decision not to timely pay its advance on costs.
93. While the Emergency Arbitrator fully appreciates the important role of such emergency proceedings in obtaining certain forms of necessary interim relief, the arbitral tribunal is soon to receive the file in this case and is a more appropriate forum for the relief sought. The Emergency Arbitrator is not convinced of its need to act before this imminent moment occurs.
94. Accordingly, the Emergency Arbitrator rejects the requested emergency measures on these additional grounds.
95. Pursuant to Article 10(5) of Appendix II to the SCC Rules, at the request of a party, the Emergency Arbitrator shall in the emergency decision apportion the costs of the emergency proceedings between the parties.
96. Pursuant to Article 10(6) of Appendix II to the SCC Rules, when apportioning the costs of the emergency proceedings, the Emergency Arbitrator shall apply the principles of Articles 49(6) and 50 of the SCC Rules.
97. Article 49(6) of the SCC Rules directs the Tribunal to apportion the costs of the arbitration, having regard to the outcome of the case, each party's contribution to the efficiency and expeditiousness of the arbitration and any other relevant circumstances.
98. Article 50 permits the Tribunal to order one party to pay any reasonable costs incurred by the other party, including costs for legal representation, having regard to the outcome of the case, each party's contribution to the efficiency and expeditiousness of the arbitration and any other relevant circumstances.
99. In their submissions, each Party has requested that the Emergency Arbitrator order the other Party to bear the costs of the emergency proceedings.57
100. Here, both parties contributed to the admirable efficiency and expeditiousness of the proceedings. While Respondent is the prevailing Party, Claimant's position was reasonable, especially in light of its success on the same merits in the 2 April 2019 Award. Accordingly, the Emergency Arbitrator finds it appropriate to order the Parties to split the costs of the emergency proceedings equally and bear the costs of their own legal representation.
57 Application, para. 36; Answer, p. 10. ↩
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101. For the reasons stated above, the Emergency Arbitrator:
Decided by the Emergency Arbitrator:
Seat of Arbitration: Stockholm, Sweden
Signature
Mr. Bernardo M. Cremades
Date: 19 July 2019