No Room At The Court - Emergency Arbitrator Provisions

Author:Mr Ryan Deane
Profession:Andrews Kurth LLP
 
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Introduction

In the recent case of Gerald Metals SA v The Trustees of the Timis Trust & others [2016] EWHC 2327, the English Commercial Court has considered the effect of emergency arbitrator provisions on the scope of the court's jurisdiction to grant interim relief under section 44 of the Arbitration Act 1996. The decision has important consequences for parties to arbitration agreements incorporating the rules of any arbitral institution, such as the ICC, SIAC or LCIA, which include emergency arbitrator provisions.

Background

The claimant, Gerald Metals, was a Swiss company engaged in commodities trading. It entered into an 'Offtake Contract' with a company called Timis Mining Corp (SL) Limited ("TMC"), which owned an iron ore mine in Sierra Leone called the Marampa mine. The contract was a form of financing arrangement, whereby Gerald Metals advanced US$50 million to TMC to finance the development of the Marampa mine. TMC agreed to sell the iron ore extracted from the mine to Gerald Metals, and to deliver it in monthly shipments. The sum advanced by Gerald Metals was to be repaid, with interest, in monthly instalments which were to be deducted from the price of the iron ore shipments.

TMC was ultimately owned by the Timis Trust, a discretionary trust governed by the law of the Cayman Islands. The main beneficiary was the eponymous Mr Timis, a businessman in the mining industry, and the sole trustee was a Panamanian company called Safeguard Management Corporation ("Safeguard").

Before entering into the Offtake Contract Gerald Metals insisted on two things. First, a letter from Safeguard giving details of the assets held by the Timis Trust. Second, that Safeguard provide a guarantee of all sums due to Gerald Metals under the Offtake Contract up to a maximum amount of $75 million. Safeguard duly complied with both requests. The guarantee was governed by English law and provided for disputes to be referred to arbitration in London under the LCIA Rules.

It wasn't long before there were serial defaults under the Offtake Contract. TCM failed to make both the required shipments of iron ore and the required payments. The amount outstanding quickly surpassed the $75 million cap in the guarantee. Unsurprisingly, Gerald Metals commenced LCIA arbitration proceedings against Safeguard under the guarantee for $75 million.

At the same time Gerald Metals began to suspect that the information it had been provided on the assets held by the Timis Trust was incorrect. In particular there was a dispute about whether the trust assets had ever included an interest in certain offshore oil concessions in Senegal or whether that asset had simply been transferred out of the trust since the Offtake Agreement had been entered into.

Gerald Metals became worried that Safeguard would dispose of the Timis Trust's assets before the arbitral...

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