Arbitration provides a direct route for parties seeking to resolve disputes outside traditional court settings. A vital tool in this approach is the use of interim measures. In plain terms, these are orders that an arbitral tribunal or court issues temporarily to safeguard assets or evidence or to ensure the eventual award holds weight. Their primary goal is to keep the balance unchanged between the contesting parties. By doing so, they deter any party from making moves that could unfairly disadvantage the other or disrupt the very purpose of opting for arbitration.
Indeed, renowned arbitrator V.V. Veeder opined that an arbitral interim measure “[could] be at least as, or more important than, an arbitral award” because, without such measures, “it is sometimes possible for a recalcitrant party to thwart the arbitration procedure – completely and finally,” such as by dissipating assets out of which an award would be paid (V.V. Veeder, ‘Provisional and conservatory measures’ in Enforcing Arbitration Awards under the New York Convention: Experience and Prospects, at 21 (UN publication, A/CN.9(063)/A664).
Accordingly, interim measures offer significant confidence in the arbitration process. This piece, part of our “Understanding Arbitration: A Guide for Businesses” series, provides an insightful guide on the application, types, and challenges of interim measures in arbitration, ensuring businesses and users of the process are well-equipped to use them effectively.
Definition and Types of Interim Measures
In arbitration, interim measures are temporary orders or directives an arbitral tribunal issues. These directives maintain the fairness and integrity of the arbitration process, ensuring the parties’ rights and interests are upheld until the dispute’s final resolution.
The common types of interim measures sought in arbitration are:
1. Maintaining or Restoring the Status Quo: This ensures that existing conditions, such as ongoing contractual obligations or business relationships, remain unchanged pending the outcome of the dispute.
2. Protection Against Harm or Prejudice to the Arbitral Process: These directives prevent parties from taking actions that might jeopardise the integrity or progress of the arbitration proceedings.
3. Preservation of Assets: In situations with a risk of asset dissipation, these measures ensure that sufficient assets remain available to satisfy any eventual award.
4. Evidence Preservation: Given the importance of evidence in arbitration, these measures are instituted to protect relevant and material evidence, guarding against its potential alteration, destruction, or concealment.
5. Security for Costs: This is a measure that compels one party, often the claimant, to set aside a specified amount as a guarantee against the legal and related costs that the other party might accrue during the arbitration. This becomes particularly relevant if there are concerns that the party in question might not be capable of covering these costs should they lose the case.
Circumstances Warranting Interim Measures
The decision to grant interim measures in arbitration often hinges on considerations that collectively ensure fairness, protection, and the overall efficacy of the arbitration process.
1. Urgency of the Situation: Arbitral proceedings, although efficient, might not always align with the immediacy some situations demand. If any delay can lead to irreparable consequences or adverse impacts, the problem screams urgency. In such cases, interim measures offer a timely intervention, staving off potential fallout until a final determination arises.
2. Inadequacy of Damages: Interim measures act as a crucial shield when there is a real risk that a party’s rights, property, or interests could face irreparable harm. If damages awarded later can’t adequately remedy this harm, interim measures offer a solution. They prevent disproportionate or irreversible damage, maintaining the fairness of the arbitration process.
3. Prospective Success on Merits: Though not a definitive indicator, if there is a reasonable possibility that the party seeking the interim measure might prevail in the main proceedings, the tribunal may be more inclined to grant the requested measure. However, this preliminary assessment does not bind the tribunal to any subsequent decisions.
4. Balance of Harms: A critical factor is the balance of harms. Interim measures are more likely to be granted when the potential harm to the party seeking them (without the measure) outweighs any possible harm to the opposing party (with the measure imposed).
How to Request Interim Measures
When a situation requires interim measures in arbitration, understanding the precise steps and strategies to make an impactful request is vital. Below is a straightforward guide that might help you act decisively.
1. Select the Appropriate Channel:
Arbitral Tribunal: Typically, your first port of call should be the tribunal presiding over the arbitration. The tribunal is familiar with the dispute’s context and can often respond swiftly, in line with the case’s specifics.
Domestic Courts: On occasion, turning to a domestic court might be more strategic, especially if the tribunal lacks certain powers or there are concerns about the enforceability of its decisions in a particular jurisdiction. However, it is essential to ensure that any court-granted measures align with the ongoing arbitration to avoid any procedural disparities.
2. Drafting an Effective Request:
Clarity is Key: Directly specify the interim measure you’re seeking. Vagueness can lead to misunderstandings or unintended outcomes.
Establish the Necessity: Lay out the reasons necessitating the measure, such as the immediacy of the situation, potential irreparable harm, and the balance of harms. Clearly show the detrimental consequences in the absence of the proposed measure.
Indicate Possible Success: Presenting a convincing case about your potential success in the main arbitration can enhance your request, even though it does not predict the final outcome.
Provide Evidence: Support your assertions with solid Documents, expert opinions, or witness statements that can substantiate your claims.
Preempt Counterarguments: Pre-emptively tackle potential objections from the opposing party. You build a more resilient case by addressing these concerns proactively.
3. Stay Updated: Arbitration rules and local laws continually evolve. Keeping abreast of recent developments, precedents, and changes can significantly influence the success of your request. This hands-on approach ensures you’re not caught off-guard by unexpected procedural issues.
Implementing Interim Measures: Practical Steps
When interim measures become necessary, the roles of arbitral tribunals and state courts are pivotal. Their collective objective is to ensure that the measures effectively protect parties’ rights during arbitration.
1. Role of the Arbitral Tribunal:
Issuing Decisions: As mentioned above, tribunals can give interim measures that dictate temporary actions or restraints.
Expedient Procedure: The arbitral tribunal should promptly address the application for interim measures. Likewise, the party applying should do so within a reasonable timeframe upon recognising the relevant facts.
Overseeing Compliance: The tribunal monitors adherence to interim measures. Where deviations arise, it provides corrective directions and ensures alignment with initial objectives.
Sanctions: While the tribunal lacks punitive powers akin to state courts, it can impose costs or draw adverse inferences against non-compliant parties, influencing the final award’s direction.
Revision and Termination: As proceedings evolve, the tribunal can modify, introduce new, or terminate existing interim measures in line with changing circumstances or new evidence.
2. Roles of State Courts:
Enforcement Assistance: Tribunals lack coercive power. As such, state courts play a pivotal role in enforcing interim measures to ensure parties comply.
Complementary Measures: In cases where an arbitral tribunal’s measure might be insufficient, state courts can introduce complementary measures.
Expediency in Emergency: When the parties require swift action and the tribunal can’t convene promptly, courts can provide immediate relief.
In both roles, the emphasis is on the immediate protection of parties’ interests without prejudging the dispute’s outcome. Ideally, both entities cooperate, creating an environment where interim measures serve their protective purpose. This synergy ensures that no party is unduly disadvantaged or subject to irreparable harm while the arbitration progresses.
Enforcing Interim Measures in Arbitration: Challenges, Developments and Practicalities
Interim measures in international arbitration have attracted attention and debate due to their enforceability across diverse legal systems. This has led to significant developments and understanding over the years.
Historical Context:
The New York Convention: The Convention primarily supports the enforcement of foreign arbitral awards, focusing mainly on final awards. However, it often leaves interim measures in a grey area. Even when tagged as ‘awards’, interim measures have faced enforcement challenges under the Convention. The central debate hinges on whether interim measures can be considered as final.
UNCITRAL’s Recognition: After 1985, UNCITRAL witnessed a significant uptick in parties requesting interim measures in their arbitrations. This trend highlighted the growing significance of such measures within international commercial arbitration, suggesting an evolution in dispute management globally.
Noteworthy Cases:
Resort Condominiums International v. Bowell (1993): In this landmark decision by the Supreme Court of Queensland, Australia, the court distinguished between enforceable awards and temporary interim measures. The court emphasised that for an award to be enforceable under the New York Convention, it must be ‘binding’. It further elaborated that a ‘binding’ award should ‘determine at least all or some of the matters referred to the arbitrator for decision.’ This was contrasted with an interim measure which, inherently, ‘may be rescinded, suspended, varied or reopened by the tribunal which pronounced it.’
Polydefkis Corp v. Transcontinental Fertiliser Co (No.Civ.A.95-0242, 1996 WL 683629 (E.D.Pa. Nov. 26, 1996)): On the other hand, the U.S. District Court for the Eastern District of Pennsylvania confirmed an arbitrator’s interim decision made in London. The court underscored that even if provisional, interim measures achieving a conclusive determination on a specific dispute-related matter can gain traction for enforceability.
The Turning Point: UNCITRAL’s 2006 Model Law:
The 2006 amendments to the UNCITRAL Model Law provided a cohesive approach to issuing and enforcing interim measures. Articles 17H and 17I are particularly notable. Article 17H underscores the binding nature of these measures, emphasising their enforceability in national courts irrespective of the issuing country. Article 17I articulates the specific grounds upon which the recognition or enforcement of an interim measure might be refused.
Article 17D allows for modifying, suspending, or terminating interim measures based on evolving case circumstances to ensure adaptability and transparency. Additionally, to keep all involved parties abreast of developments, Articles 17C and 17F stipulate stringent communication and disclosure requirements concerning these measures.
Strategies for Enforcement:
To bolster the enforceability of interim measures in arbitration, it is crucial to:
1. Understand the Jurisdiction: Familiarise yourself with the legal peculiarities of the arbitration seat and the intended enforcement venue. Different regions have distinct methods to ensure compliance with interim measures. For example, while common law jurisdictions might hold a non-complying party in contempt, many civil law jurisdictions, like France, utilise ‘astreinte’, a daily fine imposed on a party for failing to comply with a judgment.
2. Engage Local Legal Expertise: Local lawyers can provide invaluable insights into regional legal intricacies. In some countries, for example, courts might issue provisional orders that reflect the arbitral interim measure rather than directly enforcing the measure. Having someone knowledgeable about these distinctions can be beneficial.
3. Anticipate Likely Enforcement Jurisdictions: When seeking an injunction, consider where you might need to enforce it. The methods available to ensure compliance in these jurisdictions can influence the relief you request. You might want the tribunal to include a monetary sanction for non-compliance alongside the injunction for better outcomes.
4. Ensure Clarity and Compatibility in Measures: Tailor interim measures to align with the legal expectations of potential enforcement locations to avert enforcement challenges.
5. Consider the Form of the Measure: Ensure the interim measure, whether styled as an ‘award’ or an ‘order’, aligns with the preferences of jurisdictions where enforcement might be pursued. Many jurisdictions focus on the measure’s intent, but some might enforce only those styled as awards.
Conclusion: The Strategic Use of Interim Measures in Arbitration
Interim measures are vital in arbitration, ensuring that assets, evidence, and overarching party interests remain intact and undisturbed. Their essential function is to protect and instil fairness throughout the arbitration process. Achieving this requires a thoughtful balance, ensuring that while one party’s concerns are addressed, the other isn’t unjustly disadvantaged. To make the most of these measures, parties must commit to staying informed about their intricacies. Moreover, the unique nature of arbitration occasionally brings about uncertainties. In such situations, turning to seasoned professionals can offer clarity and guidance. When correctly understood and used strategically, interim measures uphold the integrity of the arbitration process and underscore its practicality, efficiency, and equitable nature.
Disclaimer:
The insights presented in this blog post aim to furnish readers with a broad understanding of arbitration within the context of global business. This material does not purport to provide legal advice, but rather serves as an informative resource. Specific decisions concerning arbitration and its relevance should always be made in consultation with qualified legal experts. Given the intricate variations and legal implications of arbitration across different jurisdictions, it is paramount to collaborate with legal professionals well-acquainted with the precise legal framework pertinent to your circumstances.
If you find this content valuable and have further questions, or if you require guidance on the detailed aspects of arbitration, please feel free to reach out to our dedicated team at arbitration@broderickbozimo.com. We stand ready to guide you through these processes and address any areas of concern.
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