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Enforcement of Emergency Arbitration Awards

US courts continue to be divided on the enforceability of emergency arbitration awards.  As addressed in previous writings, in 2019 the US District Court for the Northern District of Georgia refused to enforce an international Emergency Award in the Al Raha case, finding that it was not a final judgment and that the court lacked jurisdiction. Recently, in a District Court in the Southern District of Florida, a US court has instead upheld the enforceability of a very similar emergency arbitrator’s award.

In Vital Pharmaceuticals v. PepsiCo, Inc., the parties had an exclusive distribution agreement, and Vital Pharmaceuticals (VPX) terminated the agreement without cause.  Pepsi initiated arbitration, and received an Emergency Arbitrator Order requiring VPX to abide by the terms of the distribution agreement and continue with Pepsi as its exclusive distributor for the pendency of the arbitration.

Pepsi moved to have the Emergency Order confirmed, and the Florida District Court determined that the Emergency Order was sufficiently final to confirm, and did so. It determined that a clause in the contract allowing an appeal of the arbitration panel’s decision did not apply to appeals of interim awards of emergency relief by an emergency arbitrator. And the Court determined that a provision allowing parties to seek injunctive relief from a court did not undermine the Emergency Arbitrator’s authority under the arbitral rules.

Indeed, VPX in the case had actually sought injunctive relief from the Court prior to Pepsi’s seeking such relief from the Emergency Arbitrator, but the Emergency Arbitrator ruled on the matter first. The Court then confirmed the award and, in a later decision, applied collateral estoppel to preclude VPX from seeking contradictory injunctive relief from the Court.

Vital Pharmaceuticals is indeed the poster case for how arbitral institutions want courts to handle emergency arbitrator awards. The emergency arbitrator was able to hear arguments and determine injunctive relief in the case far more quickly than the courts were, and the courts then upheld the emergency arbitrator’s ability to do so as well as the injunctive relief ordered by the emergency arbitrator. And it all occurred quickly enough that it did not pose any significant delay to the arbitration proceedings themselves, with the emergency arbitrator’s order being confirmed by the Court only two weeks after the order was issued. It is to be hoped that more courts follow the example of Vital Pharmaceuticals rather than Al Raha.

 

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