With the enactment of the Regulations to the Arbitration and Mediation Act (“RLAM”), published in the Official Gazette on 26 August 2021, the Ecuadorian legal system expressly recognized the mechanism of emergency arbitration. Although Articles 8 and 9 of the RLAM do not regulate this mechanism in detail, their express inclusion prompted several domestic arbitration centers to incorporate specific emergency arbitration provisions into their own institutional rules.
Emergency arbitration does not seek to finally resolve a dispute on the merits, but rather to preserve the status quo until the arbitral tribunal is constituted and able to rule on the substance of the dispute. Its relevance is particularly evident in situations where waiting for the tribunal’s constitution could render any subsequent relief ineffective.
There is general consensus in arbitral practice that the granting of interim measures in emergency arbitration requires, at a minimum, the concurrence of three elements: (i) a prima facie case (fumus boni iuris); (ii) urgency or the risk of irreparable harm caused by delay (periculum in mora); and (iii) proportionality or reasonableness of the requested measure, such that it does not improve either party’s position, but merely preserves the existing situation.
We will now address practical cases in which this mechanism has been employed to preserve the status quo. Notwithstanding the foregoing, it will also become apparent that, even in the presence of similar facts and circumstances, emergency arbitrators have approached such cases differently and have granted measures that vary from among them.
Practical Application and Divergent Approaches
In recent years, emergency arbitration has been invoked in Ecuador in highly complex disputes, both between State entities and private parties and among private parties themselves. These cases reflect not only the adoption of internationally recognized standards, but also the confidence of users in the effectiveness of this mechanism. Nevertheless, arbitral practice reveals divergent approaches as to how the status quo should be preserved, even in similar factual scenarios.
An illustrative example arose in the context of a nationwide energy crisis, in which a State-owned entity entered into separate contracts with two private suppliers for the provision of goods and services. In both cases, disputes emerged regarding contractual performance, prompting the contracting authority to announce its intention to initiate unilateral termination proceedings and to enforce the contractual guarantees. The contractors commenced emergency arbitration proceedings –each before the arbitration center designated in the respective contract– and primarily requested that the entity be ordered to refrain from unilaterally terminating the contracts and from enforcing the guarantees; in one case, the suspension of penalties was also sought.
Despite the similarities, the emergency arbitrators adopted different solutions. In the first case, the arbitrator held that while it was not possible to suspend the statutory powers of the State entity, it was permissible to suspend the effects of its actions. In the second case, the arbitrator determined that it was possible to intervene in the actions of the public authority and ordered measures aimed at preventing any alteration of the contractual situation. These precedents reveal divergent views on the scope of an emergency arbitrator’s authority in relation to administrative acts.
Relevant situations have also arisen in disputes between private parties. In one case stemming from a services agreement, one party obtained autonomous constitutional interim measures before ordinary courts, with contradictory outcomes. One judge even ordered the payment of claimed amounts to a third party unrelated to the contract. In response, the counterparty initiated an emergency arbitration and sought, among other measures, orders requiring the opposing party to abstain from enforcing the judicial decisions and from continuing to seek their execution. The emergency arbitrator partially granted the requested measures but rejected those aimed at modifying or extinguishing judicial decisions, prioritizing the preservation of the status quo without encroaching upon the judicial sphere.
A second relevant case arose from a share purchase agreement involving 70% of a company’s shares, which contained an arbitration clause, while the remaining 30% was subject to ongoing litigation. Subsequently, a transferee of the 30% interest filed a judicial action seeking the absolute nullity of the share purchase agreement and claimed economic rights derived therefrom. The majority shareholder commenced emergency arbitration and requested the suspension of the judicial proceedings until the arbitral tribunal ruled on its own jurisdiction. The emergency arbitrator ordered the suspension of the ordinary court proceedings, even though the judicial claimant was not a signatory to the arbitration agreement, having nevertheless sought to benefit from the contract it aimed to have declared null and void.
This precedent not only reflects the application of fundamental principles such as pacta sunt servanda and the doctrine of non-signatory parties, but also confirms the viability, within the Ecuadorian legal framework, of measures functionally equivalent to anti-suit injunctions (in common-law systems) aimed at preserving the status quo.
Conclusions
The purpose of emergency arbitration is the preservation of the status quo, and Ecuadorian practice has shown that there is no single formula for achieving this objective. It has become apparent that, even in the face of factually comparable situations, emergency arbitrators –appointed under different arbitral institutions and procedural rules– have adopted differing understandings and approaches, which is to be expected in a mechanism that remains in the process of consolidation. In addition, arbitrators’ decisions depend on factors such as the nature of the dispute, the parties involved, and the interaction with acts of public authorities or judicial decisions. This body of practice reflects both the flexibility of the mechanism and the need for a progressive harmonization of criteria in its application.
Bernarda Muriel
Associate at CorralRosales
bmuriel@corralrosales.com