Court or tribunal? - Issues in interim and conservatory measures in international arbitration

By Mathew Stulic.

Key Points:
There are considerable differences between obtaining interlocutory orders in litigation and obtaining interim or conservatory measures in international arbitration, because of the, at times, complex interplay between arbitral rules, the law governing the arbitration and the laws in the country of enforcement.

From a claimant's perspective, ultimate success in a formal dispute resolution process may depend on the ability to obtain interim relief of various descriptions at an early stage of the proceedings. Such interim measures include orders to ensure that certain evidence is not destroyed, orders to prevent disposal of assets or to enjoin the other party from conduct which might cause irreparable harm. Interim measures such as these may avoid an otherwise Pyrrhic victory. On the other hand, a respondent may seek security for costs or orders regarding the production of evidence or the attendance of witnesses.

Obtaining interim relief in domestic litigation is governed by domestic procedural law and the relevant court rules. However, where does a party look to for interim relief in international arbitration? International arbitration has its genesis in a private agreement made between the parties to a contract. In that context, parties need to consider effective ways to obtain interim and conservatory measures.

This article provides a brief overview of the issues that a party must consider when the need for interim measures arises in the context of an international arbitration. Particular focus will be on the issues that result from the sometimes complex interaction between the applicable arbitration rules, the law governing the arbitration and the law in the country where enforcement is sought. As will be demonstrated, the choice of whether to make an application for interim measures to a court, or to apply to the arbitral tribunal itself will differ depending upon the circumstances of the particular dispute and the powers of the tribunal.

Arbitral law and arbitral rules

A claimant seeking interim relief will need to consider whether the law governing the arbitration empowers the arbitral tribunal to issue the relevant interim or conservatory measures. The governing procedural law is determined by the seat or place which the parties have chosen for their arbitration.

For international arbitrations with the seat in Australia, the International Arbitration Act 1974 (Cth) provides that the UNCITRAL Model Law has the force of law in Australia(subject to the right of the parties to opt out of the Model Law). Article 17 of the Model Law provides that, "unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute." However, Article 9 acknowledges that a party may seek interim relief from a court (and a court may grant such relief) prior to or during the arbitral proceedings.

In addition, most international arbitration rules provide the arbitral tribunal with broad discretion to order interim measures. For example:

• Article 26 of the UNCITRAL Arbitration Rules provides that at the request of a party to the arbitration, the tribunal, "may take any interim measures it deems necessary in respect of the subject matter of the dispute…", thus giving the tribunal a wide discretion.
• Article 28.1 of the ACICA Rules allows the tribunal to order interim measures of protection, but also clarifies in Article 28.8 that such power shall not prejudice a party's right to apply to any competent court or judicial authority for interim measures.
• Article 23(1) of the ICC Arbitration Rules provides that "unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate." Before the file is transmitted to the tribunal, or in "appropriate circumstances" even after the transmission of the file to the tribunal, Article 23(2) provides that an application by a party to "any judicial authority" for interim or conservatory measures will not be an infringement or waiver of the arbitration agreement.
• Article 25.1 of the LCIA Rules provides that unless the parties otherwise agree, the arbitral tribunal has the power to order the preservation of property relating to the subject matter of the arbitration. Article 25.3 provides that parties can apply for interim relief before the formation of the tribunal, but they can only apply to a court for such relief after it is constituted in "exceptional circumstances" and must forward their application to the arbitral tribunal.

General factors

A party seeking to obtain an interim measure (particularly before the arbitral tribunal has been constituted) must ensure that by taking steps in a court and thereby submitting to the jurisdiction of the domestic court it does not waive any rights it has under the arbitration agreement.

However, in most of the major international arbitration rules and the Model Law it is not deemed incompatible with the arbitration agreement to request interim relief from a court.

The ability to obtain an interim measure will generally depend upon the procedural law governing the arbitration and the law in the jurisdiction in which the interim measure is sought to be enforced.

Generally, an applicant party needs to establish the following factors:

• there is an "urgent need" for the interim measure;
• irreparable harm will result if the measure is not granted;
• the potential harm if the interim measure is not granted substantially outweighs the harm that will result to the party opposing the measure if the measure is granted; and
• there is a substantial possibility that the applicant will ultimately prevail in the dispute.

The arbitration clause

A party seeking to obtain interim measures must firstly ascertain whether the tribunal has the power to grant the relief sought under the arbitration law that governs the arbitration.

Some laws may require that the arbitration agreement expressly provides for the tribunal's power to make interim or conservatory measures.

Local law is of particular importance in respect of where the interim measure is to take effect. In this regard an applicant party must consider whether the local law where the interim measure is to take effect reserves the right to take such measures exclusively for the courts or grants those rights exclusively to the tribunal (or both).

Coercive power of the tribunal

One of the areas which causes difficulty in international arbitration is when a party seeks an interim or conservatory measure against a third party – that is, against a party that is not a party to the arbitration agreement. As arbitration is a private process and the jurisdiction of the tribunal is limited to the parties to the arbitration agreement, interim relief against a third party would have to be sought from a court.

Whether or not a court will grant such relief against a third party in relation to arbitration proceedings is again subject to the court rules and the particular circumstances of the case.

Court v tribunal

For speed and effectiveness, many parties still seek interim measures from competent domestic courts as any order from a tribunal (if not complied with) may not be enforceable.

In many jurisdictions however, the scope for obtaining such measures from local courts is narrowing as there has been criticism of judicial intervention in the arbitral process. There has thus been a trend amongst jurisdictions seeking to develop as major centres for arbitration to limit the possibility of seeking such measures from domestic courts.

While courts in countries that are signatories to the New York Convention will generally enforce foreign arbitral awards, the New York Convention only covers the enforcement of "arbitral awards" and not interim measures.

So far there is no international convention that provides for the enforcement of interim measures, although this is subject to current discussions at UNCITRAL. Therefore, even if the rules governing the arbitration grant the tribunal the power to issue interim measures, this will need to be supported in national legislation in the place where the enforcement of an interim measure is sought. Australia has already made a step in this direction by including in the International Arbitration Act an optional provision (section 23) which allows for the enforcement of an interim measure by the courts. However parties will need to specifically agree upon the operation of this provision to render it effective.

Summary

There are considerable differences between obtaining interlocutory orders in litigation and obtaining interim and conservatory measures in international arbitration. The differences in international arbitration largely arise due to the, at times, complex interplay between arbitral rules, the law governing the arbitration and the laws in the country where enforcement is sought. When considering seeking an interim measure in an international arbitration, an applicant party must consider:

• The law governing the arbitration. This issue is crucial as it determines whether the tribunal or the court (or both) have the power to grant interim relief.
• Against whom it seeks an order. If an order is sought against a non-party, then an application will need to be made to a court.
• The applicable arbitration rules. These determine the forms of interim relief which are within the tribunal's power.
• Whether there is any advantage in making simultaneous application to both the court and the tribunal. Generally, this carries a risk that one application may succeed and the other fails. One is then faced with the difficulty of which order prevails.
• Whether the other party is likely to comply voluntarily with an order from the tribunal. If the other party does not comply the relief will need to be sought from a court.

For further information, please contact Mathew Stulic.