This chapter addresses the subject of provisional or interim measures of protection (“provisional measures”),1 designed to protect parties or property during the pendency of international arbitral proceedings. Properly defined, “provisional measures” are awards or orders issued for the purpose of protecting one or both parties to a dispute from damage during the arbitral process. Most often, provisional measures are “intended to preserve a factual or legal situation so as to safeguard rights the recognition of which is sought from the [tribunal] having jurisdiction as to the substance of the case.”2 Additionally, provisional measures of protection can extend beyond merely preserving the factual or legal status quo, to require restoring a previous state of affairs or taking new actions.3
This chapter first explores the extent to which international arbitral tribunals, in both commercial and investment arbitrations, are authorized to grant provisional relief and the circumstances in which they will be willing to do so. Second, the chapter considers when national courts may grant interim relief in aid of international arbitrations. Among other things, the chapter examines whether the New York Convention forbids judicial orders granting provisional measures in aid of international commercial arbitrations, the effect of institutional rules on court-ordered provisional measures, and the circumstances in which national courts will exercise their powers to grant provisional relief in aid of arbitration (whether seated locally or abroad). Finally, the chapter considers the enforceability in national courts of provisional measures ordered by international arbitral tribunals.
A. ARBITRATORS’ AUTHORITY TO ORDER PROVISIONAL MEASURES IN INTERNATIONAL ARBITRATION
The threshold question for a party seeking pre-award relief in an international arbitration is whether the tribunal possesses the authority to order interim relief. In general, that requires consulting three sources: (a) any applicable international arbitration convention, particularly the New York Convention; (b) applicable national law; and (c) the parties’ arbitration agreement, including any relevant institutional arbitration rules.4
1. Effect of National Arbitration Legislation on Arbitrators’ Authority to Order Provisional Measures
For the most part, international arbitration conventions have little to say about the authority of arbitrators to order provisional measures. The New York Convention contains no provision expressly referring to awards of provisional measures by arbitrators.5 The Inter-American Convention is the same. The European Convention does address the general subject of provisional relief, but only provides: “[a] request for interim measures or measures of conservation addressed to a judicial authority shall not be deemed incompatible with the arbitration agreement, or regarded as a submission of the substance of the case to the court.”6 Like the New York Convention, the European Convention does not address whether or when an arbitral tribunal may grant provisional measures.
There are significant differences among national arbitration laws on the subject of tribunal-ordered provisional relief. In some nations, like Argentina, Italy and China, national arbitration law contains a mandatory prohibition against arbitrators from ordering provisional relief; following early 20th century statutory models, the granting of provisional measures in these jurisdictions is reserved exclusively to local courts, which are specifically authorized to issue provisional relief in aid of arbitration.7 Other arbitration regimes, like those in UNCITRAL Model Law jurisdictions, France, Switzerland and the United States, authorize arbitrators to grant provisional measures (absent contrary agreement) and provide for judicial enforcement of such orders.8
The following materials illustrate the varying approaches that national laws take to tribunal-ordered provisional measures in international arbitration, focusing particularly on international commercial arbitration. In reviewing these materials, consider the extent to which the availability of tribunal-ordered provisional relief under national law is left to the parties’ arbitration agreement, as well as the existence of any presumptions where the parties’ agreement is not clear in this issue.
ARGENTINE CODE OF CIVIL AND COMMERCIAL PROCEDURE
Arbitrators cannot order compulsory measures or measures leading to enforcement. They must request them from the judge who will have to lend the support of his jurisdictional powers for the most swift and effective carrying out of the arbitral proceedings.
ITALIAN CODE OF CIVIL PROCEDURE
The arbitrators may not grant attachment or other interim measures of protection, unless otherwise provided by law.
SWISS INTERCANTONAL CONCORDAT, 1969
Article 26 (generally superseded by SLPIL, Article 183)
26(1). The public judicial authorities alone have jurisdiction to make provisional orders.
26(2). However, the parties may voluntarily submit to provisional orders proposed by the arbitral tribunal.
1. Rationale for historic prohibitions under national laws against awards of provisional measures by arbitrators. Consider Article 26 of the Swiss Intercantonal Concordat, Article 753 of the Argentine Code of Civil and Commercial Procedure and Article 818 of the Italian Code of Civil Procedure. All three sections forbid arbitrators from granting provisional relief and reserve that power to the courts. What is the rationale for that prohibition? If an arbitral tribunal can be trusted to resolve the merits of the parties’ dispute, why can’t it be permitted to order provisional measures that merely preserve the status quo? Are there particular reasons to doubt the efficacy and fairness of arbitral procedures in such matters (as compared to judicial procedures)?
What consequences does an approach forbidding arbitrators from granting provisional measures have for the efficacy of the arbitral process? For example, what sort of issues will a court need to decide in granting provisional measures? What effect will judicial disposition of these issues have on the arbitrators’ consideration of the parties’ dispute?
Suppose the parties’ agreement to arbitrate provides expressly that the arbitrators shall have the authority to issue provisional measures. (As discussed below, that is the case with arbitration clauses that incorporate most institutional rules, which expressly authorize arbitral tribunals to grant provisional relief. See infra pp. 877–83.) In these instances, if a national arbitration statute forbids the arbitral tribunal from ordering provisional measures, as in Italy or Argentina, is this consistent with Articles V(1)(d) and II of the New York Convention?
2. Trend of national arbitration legislation towards permitting arbitrators to grant provisional relief (unless otherwise agreed). Consider Articles 183 and 184 of the SLPIL, excerpted at p. 159 of the Documentary Supplement, and compare them to Article 26 of the Swiss Intercantonal Concordat; also consider Article 17 of the UNCITRAL
Model Law, including the 2006 revisions to Article 17, excerpted at pp. 90 & 98-101 of the Documentary Supplement. In general, most developed arbitration statutes have moved towards permitting arbitrators to grant provisional relief, provided that the parties have not otherwise agreed. See G. Born, International Commercial Arbitration 2433-40 (2d ed. 2014); Fry, Interim Measures of Protection: Recent Developments and the Way Ahead, 2003 Int’l Arb. L. Rev. 153; Rau, Provisional Relief in Arbitration: How Things Stand in the United States, 22 J. Int’l Arb. 1 (2005). What explains this trend?
3. Authority of arbitral tribunal under UNCITRAL Model Law and most other modern arbitration legislation to order provisional relief (unless parties have otherwise agreed). Consider Article 17 of the UNCITRAL Model Law, including the 2006 revisions to Article 17. Compare Article 183 of the SLPIL. How does each provision deal with the arbitral tribunal’s power to grant provisional measures? Is this an issue that the parties may regulate by agreement? If the parties’ arbitration agreement does not expressly deal with the tribunal’s power to award provisional measures, then what is the presumptive rule—that provisional measures may be issued by the arbitrators or that they may not be? What is the rationale of this approach?
4. Authority of arbitral tribunal under most U.S. judicial decisions to order provisional relief (unless parties have agreed otherwise). The FAA is silent on the arbitrators’ powers to order provisional measures. Nonetheless, most U.S. courts have recognized the power of an arbitrator under the FAA to order provisional measures in aid of a domestic arbitration, provided that this is contemplated by the parties’ agreement. See Next Step Med. Co. v. Johnson & Johnson Int’l, 619 F.3d 67, 70 (1st Cir. 2010) (“[a]rbitrators normally have the power to grant interim relief unless the parties specify otherwise in the contract”); Pac. Reins. Mgt Corp. v. Ohio Reins. Corp., 935 F.2d 1019, 1022-23 (9th Cir. 1991) (“Temporary equitable relief in arbitration may be essential to preserve assets or enforce performance which, if not preserved or enforced, may render a final award meaningless”); Island Creek Coal Sales Co. v. Gainesville, 729 F.2d 1046, 1049 (6th Cir. 1984) (absent contrary provision in state law or parties’ agreement, tribunal may award interim injunctive relief); Certain Underwriters at Lloyd’s, London v. Argonaut Ins. Co., supra pp. 759–65.
Despite this general approach, a few lower U.S. courts have held that arbitrators generally lack the power to issue provisional relief in aid of a domestic arbitration unless the parties have expressly authorized them to do so. See Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125, 1134 (3d Cir. 1972) (parties’ agreement did not authorize tribunal to award provisional relief); Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Cal. 1977) (dicta). See also Charles Constr. Co. v. Derderian, 586 N.E.2d 992 (Mass. 1992) (AAA Rules held not to permit tribunal-ordered provisional measures). No U.S. court appears to have held that parties are forbidden by the FAA from agreeing to vest arbitrators with power to award interim relief in aid of a domestic arbitration. Most U.S. decisions impliedly reject any such conclusion. See cases cited supra p. 874 and infra pp. 880–81. Indeed, a refusal to recognize an agreement giving arbitrators power to grant interim relief would be contrary to the FAA’s rule that arbitration agreements are enforceable. See supra pp. 189, 320–21.
5. Limits under national law on arbitrators’ authority to grant provisional relief. National law may authorize arbitrators to grant provisional measures only within specified limits. For example, as discussed below, Article 17 of the 1985 UNCITRAL Model Law limits provisional measures to those that are “necessary” and that concern the “subject-matter of the dispute.” See infra p. 875. Contrast the language of Article 183(1) of the SLPIL. Which approach is preferable?
6. Limits under Article 17 of UNCITRAL Model Law on arbitrators’ authority to grant provisional relief. Consider the original text of Article 17 of the Model Law, as adopted in 1985. Note that the original text of Article 17 arguably placed restrictions on a tribunal’s powers to order interim relief (i.e., such relief must be “necessary” and “in respect of the subject-matter of the dispute”).
(a) Relief must be “necessary.” What does Article 17 mean when it provides that interim measures must be those that the tribunal considers “necessary”? Does this impose a substantive limitation on the interim relief that a tribunal may order? Or is it merely a grant of discretion?
(b) “In respect of the subject-matter of the dispute.” The original text of the Model Law grants arbitral tribunals the power to issue provisional measures that they “consider necessary in respect of the subject-matter of the dispute.” Does this language limit the arbitrators’ authority to grant provisional measures? Consider: Huntley, The Scope of Article 17: Interim Measures under the UNCITRAL Model Law, 740 PLI/Lit. 1181, 78 (2005) (urging “narrow interpretation” of subject-matter of the dispute: “a broad interpretation of the subject matter could lead to a slippery slope whereby [the] tribunal will define the all-encompassing term to include anything and everything”); A. Redfern & M. Hunter (eds.), Law and Practice of International Commercial Arbitration ¶7-26 (4th ed. 2004) (“measures contemplated relate to preserving or selling of goods rather than, for instance, preventing the flight of assets”). Is this the only interpretation of Article 17? Is it consistent with the Model Law’s objectives?
(c) 2006 Revisions to Article 17. The 2006 Revisions of the Model Law amended Article 17(1) to omit the requirement that relief be “in respect of the subject-matter of the dispute.” What explains this amendment?
7. Arbitrators’ authority to grant provisional relief is ordinarily concurrent with national court authority. Note that Articles 9 and 17 of the UNCITRAL Model Law contemplate concurrent authority of the arbitral tribunal and national courts to order provisional relief. Articles 183 and 184 of the SLPIL are similar. Is it wise to permit two separate sources for provisional measures? Or does it encourage forum-shopping and jurisdictional disputes? Does the answer depend on whether it is the parties or the arbitrators that may seek judicial relief? Does it depend on when judicial relief is sought?
8. Arbitrators lack authority to issue provisional measures against non-parties. An arbitrator’s powers are virtually always limited to the parties to the arbitration. As a consequence, the arbitrator generally will not have the power to order, for example, attachment of property held by a third party. G. Born, International Commercial Arbitration 1406-10, 2445-46 (2d ed. 2014); D. Caron, L. Caplan & M. Pellonpää, The UNCITRAL Arbitration Rules: A Commentary 517 (2d ed. 2013) (“an arbitral tribunal’s jurisdiction encompasses only the parties before it [and] interim measures may not be directed to non-parties”).
9. Arbitrators lack authority directly to enforce their provisional measures. If a party refuses to comply with tribunal-ordered provisional measures, can the arbitrators directly enforce those measures? How would that be done? As with final relief, an arbitral tribunal lacks direct coercive power to compel compliance with its awards or orders of provisional measures, and application for enforcement must be made to national courts. See, for example, the language of Article 183(2) of the SLPIL.
10. Arbitral tribunal lacks authority to order provisional measures until it is constituted. An arbitral tribunal obviously cannot issue provisional measures until it has been constituted. This is implied by arbitration legislation limiting the power to grant provisional measures to “arbitral tribunals” (not appointing authorities or individual arbitrators). See, e.g., UNCITRAL Model Law, Art. 17; SLPIL, Arts. 183, 184. Until an arbitral tribunal has been legally-constituted, it has no powers and cannot issue provisional measures. This has important practical implications because, supra pp. 694–702, the process of constituting the arbitral tribunal can take weeks or months—during which time there is no tribunal that is able to order provisional relief.
11. Judicial enforcement and review of tribunal-ordered provisional relief. A corollary of recognition of an arbitrator’s power to grant provisional relief is the availability of judicial enforcement of such orders. Consider how Articles 35 and 36 of the UNCITRAL Model Law, Articles 188-192 of the SLPIL and §§9 and 10 of the FAA provide for enforcement of awards of provisional relief. As discussed below, national courts in most developed jurisdictions will enforce provisional measures awarded by arbitral tribunals. See infra pp. 896–904. Arbitral awards of provisional measures are also subject to judicial review, just as other arbitral awards are. See infra pp. 902, 1117–20, 1134–73.
12. Choice of law applicable to arbitral tribunal’s power to grant provisional measures. What law applies to determine an arbitrator’s power to grant interim relief in an international arbitration? There is little authority on the law applicable to an arbitrator’s power to grant provisional measures. Most precedent looks to the law of the arbitral seat. See Interim Award in NAI Case No. 1694 of 12 December 1996, XXIII Y.B. Comm. Arb. 97 (1998) (applying law of arbitral seat to arbitral tribunal’s power to grant provisional measures).
What law would govern the arbitrators’ power to grant provisional measures in an arbitration seated in Argentina? Does Article 753 of the Argentine Code of Civil and Commercial Procedure apply? Suppose parties agree to arbitrate in Switzerland and their dispute arises under a contract governed by Italian law. Does Article 818 of the Italian Code of Civil Procedure apply? Or does Article 183 of the SLPIL apply? Isn’t the latter choice clearly correct? See supra pp. 619–21, 634–38 & infra pp. 888–89.
13. Arbitral tribunal’s authority to grant provisional relief in ICSID investment arbitration. Consider Article 47 of the ICSID Convention, excerpted at p. 23 of the Documentary Supplement. Is there any doubt about the authority of ICSID tribunals to grant at least some form of provisional relief? What is meant by the term “recommend any provisional measures”? Does Article 47 appear to contemplate mandatory orders of provisional relief—or just precatory recommendations? Despite Article 47’s phrasing, ICSID arbitral awards have interpreted the provision as permitting the ordering of binding provisional measures. See, e.g., Occidental Petroleum Corp. v. Repub. of Ecuador, Decision on Provisional Measures in ICSID Case No. ARB/06/11 of 17 August 2007, ¶58 (“The Tribunal wishes to make clear for the avoidance of doubt that, although Article 47 of the ICSID Convention uses the word ‘recommend,’the Tribunal is, in fact, empowered to order provisional measures. This has been recognized by numerous international tribunals….”); Tokios Tokelés v. Ukraine, Procedural Order No. 1 in ICSID Case No. ARB/02/18 of 1 July 2003, ¶4; Maritime Int’l Nominees Est. v. Guinea, Award in ICSID Case No. ARB/84/4 of 6 January 1988 (“In view of Article 47 and the applicable ICSID Rules, the Tribunal will take into account in its award the consequences of any failure by MINE to abide by these recommendations”); Judgment of 27 September 1985, Guinea v. Maritime Int’l Nominees Est., 24 I.L.M. 1639 (1985) (Antwerp Rechtbank) (“according to Article 26 of the [ICSID Convention,] any possibility to introduce an action before the national courts of one of the contracting States … is excluded for the contracting parties including the possibility to institute proceedings to obtain an attachment”).
14. Arbitral tribunal’s authority to grant provisional relief in inter-state arbitration. Consider the 1907 Hague Convention, especially Articles 37-48, excerpted at pp. 43–45 of the Documentary Supplement. What powers, if any, did arbitral tribunals have to grant provisional relief in inter-state arbitrations? Did the notion that parties would honor any award imply a submission to the arbitral tribunal’s authority to issue provisional measures ensuring that the award could have practical meaning? Compare Article 26 of the PCA Rules, excerpted at pp. 287–88 of the Documentary Supplement. Note that Article 26 expressly provides that the tribunal shall have the authority to grant provisional measures. What explains the differences from the 1907 Hague Convention?
2. Effect of Institutional Arbitration Rules on Arbitrators’ Authority to Order Provisional Measures
As described above, national arbitration statutes generally neither forbid arbitrators from granting provisional measures nor require that they have the power to do so. Rather, under most arbitration statutes, arbitrators have the authority to order provisional relief (and courts may enforce tribunal-ordered provisional measures), provided this authority is not excluded in the parties’ arbitration agreement.9 As a consequence, an arbitrator’s power to order interim relief often turns largely on the terms of the parties’ arbitration agreement, any applicable institutional rules and presumptions about the parties’ likely intentions. In practice, it is unusual (although by no means unheard of) for the parties’ arbitration agreement expressly to address the subject of provisional relief. Thus, the power of an arbitrator under most national laws to order provisional relief usually turns upon the institutional rules (if any) selected by the parties. As the following materials illustrate, many institutional rules expressly address the power of a tribunal to grant interim relief. Nonetheless, in ad hoc arbitrations, or where institutional rules do not deal with the subject of provisional relief, interpretation of the parties’ arbitration agreement and application of presumptions under national law will be required.
CHARLES CONSTRUCTION CO. v. DERDERIAN
586 N.E.2d 992 (Mass. 1992)
WILKINS, Judge. Because the applicable arbitration rules did not authorize them to do so, the arbitrators had no authority to enter an interim order directing a party to provide security toward the payment of any award the arbitrators might eventually enter. We, therefore, affirm Superior Court judgments vacating the arbitrators’ interim order for security. That award had directed James Derderian, as trustee of Parkman Realty Trust, to furnish a $1,000,000 irrevocable letter of credit, payable on demand, to the [AAA], as security for the payment of any arbitration award that might be entered against Derderian, as trustee, in the arbitration proceeding…. Charles Construction Co., Inc., seeks enforcement of the interim arbitration award in one of the actions before us, and Derderian seeks an order vacating that award in the other.
In October, 1984, Derderian, as owner of property in Brookline (“owner”), and Charles, as construction manager (“contractor”), entered into an associated general contractors’ standard form of agreement pursuant to which a condominium and parking garage were to be constructed. That agreement provided for the arbitration of certain claims, disputes, and other matters arising out of the agreement “in accordance with the Construction Industry Arbitration Rules of the [AAA] then obtaining.” Disputes did arise, and they were submitted to arbitration. The owner asserted claims for more than $2,800,000, and the contractor for more than $1,170,000. Hearings commenced in September, 1987, and continued intermittently until January, 1990, when the contractor requested the panel to issue an order for interim security. On February 16, 1990, in an interim order, the arbitrators, purporting to act under §34 of the construction industry arbitration rules, ordered the owner to provide the security that we have previously described. There is no contractual provision apart from the arbitration rules on which the contractor relies. He points to no statutory authorization for the arbitrators’ award of interim relief. The owner contends first that, if Charles is to obtain relief before the arbitration proceeding is concluded, it must come from a court.
We reject the owner’s claim that the contractor’s only avenue for obtaining interim relief is through a court order independent of the arbitration proceeding. We have indeed upheld the entry of protective court orders even though a dispute between the parties is subject to arbitration. See Hull Mun. Lighting Plant v. Massachusetts Mun. Wholesale Elec. Co., 399 Mass. 640, 648-649 (1987) (preliminary injunction upheld requiring contractual payments to continue while dispute is arbitrated pursuant to court order); Salvucci v. Sheehan, 349 Mass. 659, 663 (1965) (bill to reach and apply fraudulently conveyed property may be maintained before arbitration proceeding is concluded). If, however, there is an express agreement that authorizes an arbitrator to grant interim relief, including any authorization set forth in arbitration rules incorporated by agreement of the parties, there is no reason why an arbitrator may not act under that authority. Indeed, in such an instance, the court might be obliged both to defer to the parties’ agreement to submit the matter of interim relief to arbitration and to give any subsequent interim order the same deferential treatment that must be accorded to an arbitrator’s final order. Of course, a statute could authorize an arbitrator to grant interim relief. Therefore, if the arbitrators had contractual or statutory authority to issue an interim order, the contractor properly could have sought such an order from them and was not limited to asking for interim relief from a court.
There is little authority on the question whether, absent any controlling statute or agreement of the parties, an arbitrator has implicit authority to order a party to provide security, during the pendency of the arbitration, against the possibility of a decision adverse to that party….10 We agree in general that, in the absence of an agreement or statute to the contrary, an arbitrator has inherent authority to order a party to provide security while the arbitration is continuing. It is reasonable to assume that parties, in agreeing to arbitration, implicitly intended that the arbitration not be fruitless and that interim orders to preserve the status quo or to make meaningful relief possible would be proper. In such a circumstance, the arbitrator’s authority to act would reasonably be implied from the agreement to arbitrate itself.
This general principle has no application in this case because we construe the construction industry arbitration rules of the [AAA], which the contract incorporates by reference, to restrict the authority of an arbitrator to provide interim relief. To justify the issuance of the interim order, the contractor relies on §34 of the arbitration rules, the same authority that the arbitrators relied on when issuing their order. Section 34, as it was in effect when the interim order for security was entered in February, 1990, is entitled “Interim Measures,” and states: “The arbitrator may issue such orders for interim relief as may be deemed necessary to safeguard the property that is the subject matter of the arbitration without prejudice to the rights of the parties or to the final determination of the dispute.”11 No property was the subject matter of the arbitration. The arbitration was not a dispute over specific property but rather concerned claims of breach of contract. The fact that the owner would be obliged to satisfy any arbitration award against him from assets of the Parkman Realty Trust does not make those assets “the subject matter of the arbitration.” We do not give §34 such an expansive reading. If the drafters of §34 for the [AAA] had intended that an arbitrator have authority to issue a preliminary order that a party provide security, the rule would not have been written as it was, referring only to property that is the subject matter of the arbitration.12
There is another arbitration rule to which the contractor points but on which it relies only by a casual assertion. Section 43 of the construction industry arbitration rules, entitled “Scope of Award,” permits an arbitrator to “grant any remedy or relief that the arbitrator deems just and equitable and within the scope of the agreement of the parties….” That rule cannot authorize interim relief of the sort that the arbitrators awarded in this case. Section 43 does not explicitly refer to interim relief, and, if were to be read to do so, it would render unnecessary §34, a rule that appears to deal explicitly and comprehensively with the subject of interim measures. Moreover, whatever just and equitable relief is granted must be “within the scope of the agreement of the parties.” That language seems to be focused on the arbitrator’s final disposition (unless perhaps the parties explicitly agreed to grant the arbitrators the right to grant interim relief).13
CERTAIN UNDERWRITERS AT LLOYD’S v. ARGONAUT INSURANCE CO.
264 F.Supp.2d 926 (N.D. Cal. 2003)
1. Institutional rules relating to provisional relief. Consider Article 26 of the UNCITRAL Rules, Article 28 of the ICC Rules, Rule 37 of the AAA Rules and Article 25 of the LCIA Rules, excerpted at pp. 170–71, 192, 241–42 & 271-72 of the Documentary Supplement. What are the differences between these various approaches? What are the respective advantages and disadvantages of each approach?
2. Presumptions concerning parties’ intentions as to provisional measures in absence of express agreement. As described above, the UNCITRAL Model Law, the SLPIL and the FAA (as well as most other leading national arbitration statutes) permit arbitrators to order provisional relief—provided that the parties have not otherwise agreed. See supra pp. 873–77. In a significant number of cases, however, neither the parties’ agreement nor the institutional arbitration rules that they designate expressly address the power of arbitrators to order provisional measures. See, e.g., Charles Constr., 586 N.E.2d 992, excerpted above at pp. 878–80; 1988 ICC Rules, Art. 8(5), excerpted below at p. 913. In the absence of evidence regarding an express or implied agreement, what legal rule should govern the availability of tribunal-ordered provisional measures? That is, when the parties’ agreement is silent, should or should not arbitrators be presumed to have been intended to have the power to order provisional relief?
(a) Presumption that arbitrators lack authority to grant provisional relief (unless otherwise agreed). Some authorities hold that an arbitral tribunal lacks the power to grant provisional measures, unless otherwise agreed. In Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125 (3d Cir. 1972), the court held that the arbitrator lacked the power to order provisional relief:
We have sought to distill from the Agreement the essence of the arbitrator’s authority. Whatever that authority may be, it is clear to us that it does not include the authority to award a six million dollar cash bond to cover a liability which contrary to the requirements of the applicable breach of warranty clause, has not yet been (and may not be) “incurred or suffered,” in a situation where the parties did not provide for such security in their agreement, although they might have done so. In our view, to award, as an adjunct to declaratory relief, a form of prejudgment execution which the Agreement by its lack of reference to security seems to exclude rather than to intend, is to eclipse the framework of the agreement and to venture onto unprotected ground. We subscribe to the observations … that the draftsmen may be unable to perceive in advance what specific remedy should be awarded to meet a particular contingency and that in arbitration flexibility is important. But the principle of flexibility of relief cannot be permitted to obscure or to effect a metamorphosis of the claim itself. That untoward event would occur if we were to permit the arbitrator’s award to stand in this case.
Is this persuasive? As a general presumption about an arbitrator’s lack of authority to grant interim relief?
(b) Presumption that arbitrators possess authority to grant provisional relief (unless otherwise agreed). In contrast, consider again Article 17 of the UNCITRAL Model Law (both the 1985 and 2006 versions) and Article 183 of the SLPIL, excerpted at pp. 90, 98–100 & 159 of the Documentary Supplement. See supra pp. 873–75. What presumption does each provision adopt? Also consider Charles Construction. What approach does the court take to the burden of establishing the existence or nonexistence of an agreement to permit the tribunal to award provisional relief? How does the presumption adopted in Charles Construction differ (if at all) from that in the UNCITRAL Model Law and the SLPIL?
What is the presumption in Charles Construction concerning the arbitrator’s power to order provisional measures when the parties have not agreed to institutional arbitration rules? Should a similar approach be taken to institutional rules under the UNCITRAL Model Law and SLPIL? If the parties have agreed to institutional arbitration rules, what does Charles Construction presume concerning the arbitrator’s power to award provisional relief?
What approach does the court take in Certain Underwriters to the arbitrators’ presumptive authority (or “inherent” authority) to grant provisional measures? Note the court’s refusal to annul Interim Order No. 2. Why did the court annul Interim Order No. 3? Was it because the arbitral tribunal lacked authority to issue provisional measures? Or because of the particular character of the sanctions imposed by Interim Order No. 3?
3. What presumption should be adopted regarding arbitrator’s authority to grant provisional relief? Which approach to the arbitrator’s implied authority—the UNCITRAL Model Law’s, Charles Construction’s, Certain Underwriters’, or Swift’s—is preferable? Would it be better to take an approach not accepted in either the Model Law or Charles Construction—i.e., that the tribunal presumptively does not enjoy power to award provisional relief, absent an affirmative showing of an express or implied agreement to that effect? What are the likely expectations of the parties in the absence of an express agreement? What approach is most likely to produce a fair and efficient dispute-resolution process?
4. U.S. judicial decisions concluding that arbitrators presumptively possess implied authority to grant provisional relief (unless otherwise agreed). As noted above, most U.S. courts have adopted a position similar to that of the UNCITRAL Model Law—i.e., that parties will generally be presumed, absent contrary agreement, to have conferred the power to award provisional relief on their arbitrator, even where institutional arbitration rules are involved. See supra pp. 874, 881. The opinions in Charles Construction and Certain Underwriters illustrate this approach. Is this approach wise? Is there a better presumptive rule?
Most commentators on international arbitration also conclude that arbitrators presumptively have the power to order provisional relief (unless otherwise agreed): “The authority of arbitrators to grant conservatory and provisional measures stems from their inherent powers to conduct the arbitral proceedings and, more specifically, any additional authority granted to them in the contract between the parties.” Hoellering, The Practices and Experience of the American Arbitration Association, in ICC, Conservatory and Provisional Measures in International Arbitration 31 (1993). See also Higgins, Interim Measures in Transnational Maritime Arbitration, 65 Tulane L. Rev. 1519, 1535-36 (1991) (“By expressly consenting to the arbitration of their dispute, the parties implicitly accord to the arbitrators a general grant of power to exercise any authority necessary to reach a determination on the merits of the dispute.”).
5. Arbitrators’ power to grant provisional measures under ICC Rules. The ICC Rules were revised in 1998 to more directly address the arbitral tribunal’s power to grant provisional measures. Consider Article 8(5) of the 1988 version of the ICC Rules. Does this provision affirmatively grant an arbitrator power to award interim relief? See Schwartz, The Practices and Experiences of the ICC Court, in ICC, Conservatory and Provisional Measures in International Arbitration 46 (1993) (“the arbitrators themselves are not expressly authorized to issue [provisional] measures”). How would Article 8(5) of the 1988 ICC Rules be interpreted under the analysis in Charles Construction? In Certain Underwriters? Compare Article 28 of the 2012 ICC Rules and Article 23 of the 1998 ICC Rules to their predecessor in the 1988 ICC Rules. Note that Article 28 of the 2012 Rules and Article 23 of the 1998 Rules expressly grant the arbitral tribunal authority to order “interim or conservatory measures.” Was this a desirable change to the ICC Rules? Compare Article 28 of the 2012 ICC Rules with Article 25 of the 2014 LCIA Rules. Which approach is wiser?
6. Interpretation of other leading institutional rules. Consider again Article 26 of the 2010 UNCITRAL Rules, Article 25 of the 2014 LCIA Rules and Article 28 of the 2012 ICC Rules. How would each be interpreted under the analysis in Charles Construction? Under Certain Underwriters? Consider Article R-37 of the 2013 AAA Commercial Rules, which replaces the version of the AAA Rules at issue in Charles Construction. Would the case be decided differently under the new rule?
7. ICC Rules for A Pre-Arbitral Referee Procedure. Some arbitral institutions have adopted specialized rules that seek to provide a non-judicial mechanism for obtaining urgently-needed provisional relief. The ICC Rules for a Pre-Arbitral Referee Procedure were an early example of such efforts. See Hausmaninger, The ICC Rules for A Pre-Arbitral Referee Procedure: A Step Towards Solving the Problem of Provisional Relief in International Commercial Arbitration, 7 ICSID Rev. 82 (1992). These rules were used rarely (less than a dozen instances). That was because parties must specifically agree to the use of this specialized procedure; the procedures are not included within the ICC Rules. Given the realities of litigation, this agreement cannot often be expected to occur after a dispute has arisen; on the other hand, at earlier stages, parties are not generally sufficiently focused on the procedural intricacies of future disputes to make provision for specialized issues.
8. Institutional rules providing for urgent provisional relief by “emergency arbitrators.” An alternative and improved approach to that of the ICC’s Pre-Arbitral Referee Procedure involves so-called “emergency arbitrators” appointed on a fast-track basis solely to decide claims for urgent interim relief before the arbitral tribunal is constituted. A number of sets of institutional rules have been recently revised to provide for “emergency arbitrators,” including the ICC Rules (Art. 29 and Appx. V), ICDR Rules (Art. 6), LCIA Rules (Art. 9B), HKIAC Rules (Schedule 4), NAI Rules (Art. 42a), SCC Rules (Appx. II), SCC Rules for Expedited Arbitrations (Appx. II), SIAC Rules (Rule 26(2) & Schedule 1), Swiss Rules (Art. 43), CIETAC Rules (Art. 23 & Appx. III) and WIPO Rules (Art. 49). Each of these sets of rules provides for the appointment, in cases of urgency, of a sole arbitrator to resolve requests for provisional measures prior to constitution of the full arbitral tribunal. See, e.g., 2014 ICDR Rules, Art. 6 (“Emergency Measures of Protection,” involving appointment of special “emergency arbitrator”); 2010 NAI Rules, Art. 42. As soon as the full tribunal is constituted, the arbitrator responsible for considering initial requests for provisional measures ceases to play any further role in the arbitral proceedings. See, e.g., 2014 ICDR Rules, Art. 6(5); 2013 HKIAC Rules, Schedule 4, ¶20. Because the provisions do not require a separate agreement by the parties to this mechanism, they offer a reasonable prospect of being used in actual dispute resolution. Is this an appropriate approach towards providing for provisional relief? What are its advantages and disadvantages?
9. Characterizing “emergency arbitrators.” Is an “emergency arbitrator” really an arbitrator? Recall the definition of “arbitration.” See supra pp. 131–37 & infra pp. 1059–61. How does dispute “resolution” by an emergency “arbitrator” resemble “arbitration”? How does it differ?
Is a decision of an emergency arbitrator an award? Subject to annulment under national law? To recognition under the New York Convention? Why or why not?
10. Arbitrators’ authority to order security and counter-security. A key feature of provisional relief is security—either for ultimate liability or for attorneys’ fees and other legal costs—and counter-security—for the damages caused by provisional measures granted for a party that ultimately is unsuccessful. Note that this was the type of interim relief addressed in Charles Construction and Certain Underwriters. Consider the institutional rules set forth above; what provisions do these rules make for security orders by tribunals?
3. Arbitrators’ Exercise of Authority to Order Provisional Relief
Assuming an arbitrator possesses the power to order provisional relief, how do arbitrators choose to exercise that authority? The short answer is that arbitrators were historically hesitant to grant provisional relief, even when authorized by national law to do so, but that in recent years tribunals have shown greater decisiveness.14 Nonetheless, the circumstances in which arbitrators will grant interim relief vary widely, depending on the applicable law(s), relevant contractual terms and the tribunal’s assessment of discretionary considerations. The following materials illustrate how arbitral tribunals assess these circumstances.
DECISION OF GENEVA CHAMBER OF COMMERCE OF 25 SEPTEMBER 1997
19 ASA Bull. 745 (2001)
This arbitration was initiated on 21 October 1996, by A SpA (hereinafter “Claimant” or “A”), a company registered in Italy, against B. A.G. (hereinafter “Defendant” or “B”), a company registered in Germany, under the Arbitration Rules of the Geneva Chamber of Commerce and Industry. A claims from B [a specified sum in] damages. B moves for the dismissal of A’s claim and counterclaims for restitution of amounts paid to A, i.e., [a sum] plus [another specified sum] plus an award for lost profits.…
In a letter dated 26 March 1997, Defendant informed the Arbitral Tribunal that A had gone into voluntary liquidation on 20 December 1996, and that Mr. R. of Bologna had been appointed as liquidator. This prompted Defendant to request the Tribunal (a) to order a stay of proceedings, and (b) to order A “to provide security for costs by way of a cash deposit or a bank guarantee issued by a first class bank in an appropriate amount to be determined to the Arbitral Tribunal for the compensation of attorney’s fees it may be ordered to pay to B. Such security for costs to be provided either in cash or by an irrevocable bank guarantee issued by a first class bank.” The motion for suspension was later withdrawn. In an answer … Claimant … moved for dismissal of Defendant’s request for a cautio. On the Tribunal’s directions, each party then filed short briefs on the Defendant’s motion for security for costs.… The Arbitral Tribunal, having met for deliberation, now issues the following ruling.
The parties are of opposite views as to the authority of an Arbitral Tribunal to issue an order requiring a party to furnish security for costs. Defendant appears to consider it as a matter of course; it does not quote any authority in support of its motion. By contrast, Claimant contends that, in international as well as in municipal arbitration, arbitrators sitting in Switzerland have no authority to order security for costs. In its view, such is the conclusion to be derived from a review of Swiss legal writing. This view was further adopted in four reported decisions of arbitrators sitting in Switzerland.
It is a fact that, in Swiss legal writing, there is a widespread opinion that there is no room for security for costs in arbitration. This seems to be the prevailing view in municipal arbitration under the Concordat. [Some authorities] are less categorical, but their reluctance seems to proceed from the fact that security for costs is unusual in ordinary court proceedings and should not be expected in arbitration. At this junction, it should be remembered that security for costs has practically disappeared from the State Courts of continental Europe, due to the widespread acceptance of relevant Hague Conventions (1905, then 1954). This explains, to some extent at least, the reluctance of Swiss legal writers as to its use in arbitration. It should be further noted that most of the writers aptly quoted by Claimant have addressed the problem from a municipal rather than from an international point of view. By contrast, three of the four decisions relied upon by Claimant have been issued in international arbitration.…
The third decision quoted by Claimant is the most detailed and the most recent. [1995 ASA Bull. 529]. [T]he learned arbitrator formed the view that [“in general, commentary and case law are hostile to security for costs (cautio judicatum solvi) with regard to arbitration”]. There is furthermore no mention of it in most arbitration rules, Art. 15.2 [of the 1985 LCIA Rules] being an exception. As for the [SLPIL], it does not mention it either way. Turning then to general considerations, the learned arbitrator holds the view that if the parties had contemplated the possibility of security for costs, they would have mentioned it in the arbitration clause, all the more so that, by definition, international arbitration arises between parties established in different countries. He further holds that the possibility of enforcing an award for costs under the New York Convention is an additional reason for dismissing the motion.
The Tribunal cannot but share the view expressed in that decision as to the legal situation under the [SLPIL]. The wide terms of Art. 182(2) are such that it could not be contended that they deprive the arbitrators from the authority to order security for costs. The same is true for Art. 19 of the Arbitration Rules of the Geneva Chamber of Commerce. The further fact that the Act grants the arbitrator the power to order provisional measures allows the conclusion that an order for security for costs would not be alien to the spirit of the Act. The question whether the arbitrator has such authority and, if so, at what conditions he may make such an order depends therefore on more general considerations.
In this respect, the Tribunal does not consider as binding the opinions expressed by the majority of Swiss legal writers, since they deal mainly with municipal, e.g., Concordat arbitration, and are clearly impressed by the disappearance of security for costs from the State Courts. But international arbitration is not restricted to the shores of Swiss lakes. There are precedents in international arbitration which actually ordered security for costs. Thus, in 1990, in an ICC arbitration (No. 6697), the Arbitral Tribunal issues a detailed decision in which its authority to issue such an order was affirmed. [1992 Rev. arb. 143.] Similarly, another decision in another ICC arbitration required security for costs from both Claimant and Counter-Claimant (ICC arbitration No. 6682, 1993).
It should further be remembered that in England, one of the major centres of international, mainly professional, arbitration, security for costs is in daily use. Under the previous Arbitration Act, the power to order it [lay] with the Courts, and the exercise of this power in ICC arbitration gave rise to the well-known dispute that followed the decision of the House of Lords in Ken Ren  2 WLR 631. Under the Arbitration Act, 1996, §38(3), this power was transferred to the arbitrator.
Contrary therefore to the view expressed in Switzerland, security for costs is resorted to in international arbitration, and arbitrators have issued orders, therefore. As already said, the authority to issue such an order in international arbitration located in Switzerland may be derived from Art. 182(2) and 183 of the Act.
The question is not therefore whether but when an arbitrator may require from a party to give security for costs. It is obvious that registration or domicile of the party outside the place of arbitration cannot justify such an order, since such situation is in the essence of international arbitration. It should be furthermore taken into consideration, that international arbitration arises in connection with contracts or other operations of international trade, in the wide sense of the world, which imply greater risks than domestic trade. Such risks are to be borne by the parties including, in the view of this Tribunal, the risk of the other party failing into financial difficulties up to and including bankruptcy. By contrast, it may happen that a party takes certain steps in order to divest itself from its assets so as to be just an empty shell in case it loses the arbitration. Such manoeuvres, contrary to good faith, could justify an order for security for costs. Another instance is provided by the facts in Ken Ren: an important arbitration is launched by a company that is just an empty shell; if it wins, it cashes the award; if it loses, it will not pay anything.
In the particular circumstances of this case, the shareholders of A have decided to go into liquidation. In the view of the Tribunal, it is a commercial risk that has to be borne by Defendant. It has neither been alleged nor proved that this decision was made in circumstances amounting to bad faith. The liquidator of the Claimant company has the powers and the responsibilities prescribed by Italian law. It is the responsibility of the Defendant to take whatever steps that are open to creditors under Italian law in order to safeguard its rights as possible creditor. In summary, the decision of A to go into voluntary liquidation does not go beyond the commercial risks to be borne by the parties in an international contract. In the light of the foregoing, the Tribunal comes to the conclusion that there is no ground for the issuance of an order for security for costs.… The Arbitral Tribunal dismisses Defendant’s motion for security for costs.…
INTERIM AWARD IN ICC CASE NO. 8786
11(1) ICC ICArb. Bull. 81 (2000)
The dispute arose in connection with Defendant’s cancellation of order for ready-made clothes from Claimant. Claimant argued that the orders were cancelled shortly prior to delivery of the goods, despite its having submitted samples found to be acceptable. It claimed damages for unusable materials, loss of profit and costs. Defendant invoked late performance by Claimant, arguing that it had been forced to terminate the contract on account of Claimant’s failure to respect delivery dates and its refusal to grant a price reduction for such failure. Defendant in its turn claimed damages for loss of profit and various costs, and contested those requested by Claimant. In the arbitration proceedings before a sole arbitrator, Defendant asked for an interim award on security. The Arbitral Tribunal rejected this request [reasoning as follows].
Both parties have agreed to the applicability of the following procedural rules.… [a] the rules set forth in article 8 of the Terms of Reference; [b] the ICC [Rules]; [c] the provisions of chapter 12 of the [SLPIL]). [T]he Defendant and Counter-claimant has filed a brief, seeking the following relief: … “1. The Claimant must provide adequate security for the counterclaim by establishing a[n] irrevocable bank guarantee that will be unconditionally released to the Defendant upon presentation of the final award in the present arbitration in the amount awarded to the Defendant.” Defendant argues in essence that security measures [are] necessary because of “Claimant’s failure to cooperate” in the … arbitration proceedings.… The Defendant believes “that should the award in the instant case be in its favor the Claimant will not voluntarily comply such an award.” In its brief … the Defendant quotes Decision 96/627 of February 1, 1996, rendered by the 15th Legal Department of the Turkish Court of Appeals…. Also a case study of Dr. Felix R. Ehrat of February 2, 1996, about “Practical Enforcement Experience in Turkey” … is quoted. Quoting [these sources], the Defendant [claims] that “the chances of a foreign party to obtain recognition of an arbitral award in Turkey are less than slim.” …
In its brief … the Claimant and Counter-defendant does not agree with the Defendant’s request for security measures. The Claimant asks for more respect for the Turkish Courts and maintains that the Defendant’s request is unacceptable because “[t]he Defendant’s Attorney is acting like he has won the trial already and by doing this the Arbitration is becoming more complex.”…
Decision 96/627 quoted by the Defendant and Counter-claimant … must be distinguished from the situation in the present arbitration.… The Turkish Court of Appeals… found that the Arbitral Tribunal had violated the arbitration agreements between the parties, because the Arbitral Tribunal [came] to the conclusion that the wording “Turkish laws in force” was to be understood as a choice of Turkish substantive law only. The Turkish Court concluded that the parties had also agreed on the choice of procedural law. Therefore, it held that the reservation of Art. V(i)(d) of the New York Convention was applicable.… Because the Commercial Court of Ankara found that Turkish substance and procedural law was applicable, it held that the arbitral award did not qualify as a “foreign” award within the meaning of Art. 1 of the Convention [and therefore could be annulled by Turkish courts, notwithstanding the fact that the arbitration was seated in Switzerland]….
In the present arbitration, however, there exists a clear agreement concerning the applicable substantive and procedural law … between Defendant and Claimant. Thus, Decision 96/627 must be distinguished from the present arbitration with respect to the procedural and substantive law applicable to the dispute. In the present matter, none of the parties has ever maintained so far that Turkish substantive and/or procedural law should be applicable to the dispute. [Likewise,] none of the parties has maintained so far that an award should not qualify as a “foreign” award in the sense of Art. 1 [of the] Convention…. Based on the above considerations the Arbitral Tribunal concludes that Defendant has failed to show that, as a direct consequence of Decision 96/627, an award rendered in its favor would not be enforceable.… Defendant, therefore, has further failed to show on a prima facie basis that its chances to obtain recognition of an award in the present matter in Turkey “are less than slim.”…
The Terms of Reference as well as the ICC Rules do not contain any specific rule concerning security measures (cf, however, … below regarding Art. 8(5) ICC Rules). Art. 183 [of the SLPIL] contains rules regarding … provisional and protective measures. One possible measure is to order the deposit of security [citing Swiss academic commentary regarding Article 183 of the SLPIL]. As a consequence, a security measure as requested by the Defendant is basically possible. Thus, it has to be examined, whether such a measure would be justified in the present matter.
It is undisputed that to “preserve the legitimate rights of the requesting party, the measures must be ‘necessary.’ This requirement is satisfied only if the delay in the adjudication of the main claim caused by the arbitral proceedings would lead to a ‘substantial’ (but not necessarily ‘irreparable’ as known in common law doctrine) prejudice for the requesting party….” “The Arbitral Tribunal may only order provisional measures, if the requesting party has substantial threat of a not easily reparable prejudice” [citing K. Berger, International Economic Arbitration 336 (1993).] Furthermore, it is required that “the facts supporting the request for interim measures have to be substantiated by prima facie evidence.” The Defendant has failed to produce prima facie evidence for its allegation that an arbitral Award rendered in its favor would not be enforceable in Turkey.… Thus, the Defendant has failed to sufficiently substantiate the existence of a not easily reparable prejudice.
A further precondition for an interim award on security is that provisional and protective measures have to be urgently needed. The Defendant did not allege nor show that provisional and protective measures in the present arbitration are urgently needed.
The Arbitral Tribunal therefore concludes that Defendant has failed to show that the prerequisites under Art. 183 for the relief sought are fulfilled in the present matter. Finally, the Arbitral Tribunal wishes to emphasize that the Defendant is “at liberty to apply to any competent judicial authority for interim or conservatory measures, and [he] shall not by so doing be held to infringe the agreement to arbitrate or to affect the relevant powers reserved to the arbitrator.” (Art. 8(5), ICC Rules). Once the file is transmitted to the arbitrator, Art. 8(5) [of the] ICC Rules provides for “exceptional circumstances” as precondition to order such measures. Whether exceptional circumstances are given in the present matter would have to be decided by the competent authorities in accordance with their local law. Thus the Defendant is free to try to seek “interim or conservatory measures” directly from the competent authorities in Turkey or in any other competent jurisdiction.… The Arbitral Tribunal directs and awards as follows: … Defendant and Counter-claimant’s request for an interim award on security … is hereby dismissed.…
CERTAIN UNDERWRITERS AT LLOYD’S v. ARGONAUT INSURANCE CO.
264 F.Supp.2d 926 (N.D. Cal. 2003)
1. General absence of legislative standards governing exercise of arbitrators’ authority to grant provisional measures. Consider Article 17 of the 1985 UNCITRAL Model Law and Article 183 of the SLPIL, excerpted at pp. 90 & 159 of the Documentary Supplement. Does either provision address the question of what standards are applicable to an arbitrator’s grant of provisional measures? Compare the U.S. FAA. How are arbitrators, whose authority derives from these statutory provisions, to determine whether or not to exercise that authority by granting interim relief? What is the legal source of standards governing an arbitrator’s decision whether or not to grant provisional relief?
2. Choice of law governing arbitrators’ exercise of authority to grant provisional measures. As discussed above, the law governing the arbitral tribunal’s authority to grant provisional measures is ordinarily that of the arbitral seat. See supra p. 876. Note that the Geneva Award looks to Swiss law to determine whether the arbitrators had the power to issue a particular type of provisional measures (security for costs).
Is the law of the arbitral seat necessarily the law that governs the exercise—as distinguished from the existence—of the arbitrators’ authority? Is there any reason that a different law should apply to the arbitral tribunal’s authority to order provisional measures and the exercise of that authority? What law did the Geneva Award look to in deciding whether to exercise its authority to grant security for costs?
In particular, three principal choices are possible for the law governing the exercise of authority to order provisional measures: (1) the law of the arbitral seat; (2) the law governing the parties’ underlying contract or relationship; or (3) international standards. There are authorities adopting each of these choices of law (or, alternatively, looking to the laws of multiple jurisdictions). Compare Interim Award in ICC Case No. 7544, 11(1) ICC ICArb. Bull. 56 (2000) (considering French domestic standards as “helpful as a pointer”) with Interim Award in ICC Case No. 8879, 11(1) ICC ICArb. Bull. 84, 89 (2000) (“… both the laws of Ontario (lex fori) and Mexico (lex contrac-tus) expressly grant arbitrators that authority in substantially the same terms as Article 17 of the UNCITRAL Model Law …”) and Decision of 25 September 1997, 19 ASA Bull. 745 (2001) (considering international practice as to whether request for interim relief should be granted).
Consider the Geneva Award. Is its application of standards drawn from international practice appropriate? What are the benefits of applying such standards? How would a tribunal determine the contents of these international standards? Consider the Interim Award in ICC Case No. 8786. What law does it apply to the question of the standards for granting interim relief?
Does it make sense for the standards for granting provisional measures to be ascertained according to the law of the arbitral seat? That would mean that the availability and extent of provisional measures would depend on the location of the arbitral seat—is that appropriate? Recall that most arbitration legislation does not contain standards governing the grant of interim relief by an arbitral tribunal. See supra p. 888. To what body of law, within the arbitral seat, should an arbitral tribunal then look in determining whether or not to grant provisional relief? Does it make sense to look to the standards applicable in local courts for provisional measures?
Alternatively, does it make sense for the availability and extent of interim relief to be determined by the law governing the underlying contract? If the parties’ disputes involved claims under different contracts, or both tort and contract claims, governed by different substantive laws, wouldn’t this mean that different standards for provisional relief applied to different disputes? Is this sensible?
3. Choice of law governing standards for provisional measures under Article 17A of 2006 UNCITRAL Model Law. Revised Article 17A of the 2006 Model Law, excerpted at pp. 98–99 of the Documentary Supplement, provides that a party seeking interim measures must satisfy the tribunal that specified conditions exist (irreparable harm outweighing possible injury to other party and reasonable possibility of success on the merits). Does this suggest what law would govern the tribunal’s exercise of power to order provisional measures? Is it a sensible approach to the choice-of-law issue?
4. Standards for provisional measures. Stated generally, most international arbitral tribunals require showings of (a) serious or irreparable harm to the claimant; (b) urgency; and (c) no prejudgment of the merits, while some tribunals also require the claimant to establish a prima facie case on the merits. Considered more closely, many arbitral tribunals also look to the nature of the provisional measures that are requested, and the relative injury to be suffered by each party, in deciding whether to grant such measures. In particular, some provisional measures (e.g., preserving the status quo or ordering performance of a contract or other legal obligation) will typically require strong showings of serious injury, urgency and a prima facie case, while other provisional measures (e.g., preservation of evidence, enforcement of confidentiality obligations, security for costs) are unlikely to demand the same showings.
(a) Serious or irreparable harm. Consider ICC Case No. 8786. What standard does the tribunal require in order to grant provisional measures? What is meant by the requirement that “the delay in the adjudication of the main claim caused by the arbitral proceedings would lead to a ‘substantial’ (but not necessarily ‘irreparable’ as known in common law doctrine) prejudice for the requesting party?” What is the source of this standard? Is it based on any legal rules, set forth in any legal system? If not, what is it based on?
Consider the following excerpt from a leading ICSID award: “a provisional measure is necessary where the actions of a party ‘are capable of causing or of threatening irreparable prejudice to the rights invoked.’” Tokios Tokelés v. Ukraine, Procedural Order No. 3, ICSID Case No. ARB/02/18, ¶8. When will a delay in paying a monetary claim ever constitute “irreparable” prejudice? If only “substantial” harm, rather than “irreparable” damage, is required, how substantial must the harm be?
(b) Urgency. Consider again ICC Case No. 8786. Note the requirement that the party seeking interim relief demonstrate that the need for such measures is “urgent.” What does this requirement mean and how does it differ from the requirement that serious harm will be suffered if interim relief is not granted? Again, what legal system defines how urgent harm must be before provisional measures will be warranted?
(c) No prejudgment of merits. It is often said that provisional measures will only be granted if doing so does not “prejudge the merits” of the dispute. That is, “an arbitral tribunal must refrain from prejudging the merits of the case.” Lew, Commentary on Interim and Conservatory Measures in ICC Arbitration Cases, 11(1) ICC ICArb. Bull. 23, 27 (2000). What does this formulation mean? Does it argue against the tribunal making a decision that might prejudice or bias its final decision on the merits, or does it argue against the tribunal granting the same relief that is requested on the merits? If the former, should it not be clear that a tribunal’s interim decision on provisional measures is just that—a temporary decision that does not bind, or even predispose, the arbitrators with regard to their final decision? If the latter, is not interim relief necessarily different from final relief, in that it is by definition only temporary and subject to revision? What purpose does the “no prejudgment” rule serve?
(d) Prima facie basis for claim. Some authorities have held that the party requesting interim relief must demonstrate a prima facie case on the merits of its claim (or, in other formulations, a probability of prevailing on its claim). According to one award: “The present Arbitral Tribunal is not a referee jurisdiction, but a jurisdiction of the merits seized of provisional measures.… a serious dispute does not prevent a broader appreciation, although on a provisional basis, of the respective arguments of the parties.” Partial Award in Unidentified ICC Case, quoted in Schwartz, The Practices and Experience of the ICC Court, in ICC, Conservatory and Provisional Measures in International Arbitration 45, 60 (1993). Did the tribunal examine the existence of a prima facie case in ICC Case No. 8786 or the Geneva Award? Is it appropriate for a tribunal to consider the merits of the parties’ claims at a preliminary stage? Consider: J. Lew, L. Mistelis & S. Kröll, Comparative International Commercial Arbitration ¶23-62 (2003) (“To avoid any appearance of prejudgment arbitrators are invariably reluctant to express their views on the merits before they have considered at least a significant amount of the evidence presented by the parties. For this reason the merits of the case rarely play any direct role in determining whether or not interim relief is granted.”).
(e) Balancing of interests. Many awards concerning provisional measures do not appear fully to discuss the real considerations underlying the tribunal’s conclusions. Consider the following:
“In fact, even this formulation [‘substantial’ harm] obscures more complex considerations. On close examination, tribunals appear to consider the extent to which (a) the claimant will suffer serious injury during the arbitral proceedings; (b) the extent to which such injury appears compensable in a final award; and (c) the extent to which it is just or fair that the burden or risk of loss during the arbitral proceedings fall on one party or another (including considerations such as whether one party is seeking to alter the existing status quo to its advantage during the arbitral proceeding, the likelihood of success of each party on the merits of its case, and the relative hardship to each of the parties if provisional measures are or are not granted). Some authorities refer to this, accurately, as a ‘balancing of interests’ or a ‘balancing of hardships.’” G. Born, International Commercial Arbitration 2471 (2d ed. 2014).
Is it appropriate for arbitrators to engage (generally without discussion) in this “balancing of interests”? Does this amount to a form of arbitration ex aequo et bono? Is it what commercial parties expect and want?
Suppose a claimant, asserting a prima facie credible claim, appears likely to suffer serious (but not irreparable) injury as a consequence of steps threatened by the respondent to alter the existing status quo. Should provisional measures be likely? Suppose the respondent’s actions appear designed to make ultimate enforcement of an award more difficult (e.g., transferring disputed property outside the ordinary course of business) and/or the respondent does not appear likely to suffer material harm from a grant of provisional measures. Conversely, suppose a respondent is merely pursuing business in the ordinary course, its contemplated actions appear unaffected by litigation considerations and it will suffer demonstrable damage from the requested provisional measures? Should provisional measures presumptively be available?
Suppose a claimant licensee has failed to present a prima facie case of wrongful termination of a license agreement, while the respondent licensor has presented a comprehensive defense as to why it was contractually entitled to terminate. Should this affect a tribunal’s willingness to order the respondent licensor to continue to permit use of licensed property and to supply updates on a provisional basis during the pendency of the arbitration? Conversely, if the claimant licensee has advanced a very thorough case as to wrongful termination, countered by no serious argument or evidence from the respondent licensor, should provisional measures be more readily granted?
(f) Different standards for different types of interim relief. Does it make sense to apply the same requirements to all types of interim relief? Suppose a party seeks an interim order permitting third-party inspection of disputed goods or damaged property, or preservation of documentary evidence. Are the same standards appropriate in considering such requests as are appropriate when a party requests monetary security for payment of its claim?
5. Arbitrators’ “discretion” to order provisional measures. It is sometimes said that arbitrators have “discretion” whether or not to order provisional measures. According to one commentator, “arbitral tribunals have very wide discretion in determining the appropriate measure.” Yesilirmak, Interim and Conservatory Measures in ICC Arbitral Practice, 11(1) ICC ICArb. Bull. 31, 33 (2000). Or, “[i]n international arbitration, there are no clear guidelines to the types of relief available or when they should be granted.” Lew, Commentary on Interim and Conservatory Measures in ICC Arbitration Cases, 11(1) ICC ICArb. Bull. 23, 26 (2000). Is it appropriate that significant legal matters—the availability of security over substantial claims, the right to market a product or use intellectual property—be left to the arbitrators’ discretion? Again, does this amount to arbitrators exercising the power to decide ex aequo et bono (which requires the parties’ express consent, see infra pp. 1020–21)?
6. Security for underlying claims or costs of arbitration. Consider ICC Case No. 8786 and the Geneva Award. What interim relief is sought in each case? How does the relief differ? Which relief is more onerous for the party against whom it is sought? Consider also the relief ordered by the tribunal in Charles Construction, supra pp. 878–80. What interim measures were obtained in each case? Compare Interim Order No. 2 in Certain Underwriters. What interim measures were obtained there? What explains the different approaches of the various arbitral tribunals?
Consider the tribunal’s observation in the Geneva Award about obstacles to obtaining security for the amount of a party’s legal costs: the risks that a counterparty will be unable to pay an award of costs “are to be borne by the parties, including, in the view of this Tribunal, the risk of the other party failing into financial difficulties, up to and including bankruptcy.” Is that a persuasive reason for withholding interim relief? Or, on the contrary, should the risks of international commerce argue for more expansive possibilities for provisional relief? Does the same rationale, as that cited by the Geneva Award, also apply to requests for security for an underlying claim?
When might it be appropriate to order security for legal costs? How does the Geneva Award answer this question? When might it be appropriate to order security for an underlying claim? Suppose that, in ICC Case No. 8786, it was clear that Turkish courts would not recognize the tribunal’s award. Would it have then been appropriate to order security for the underlying claim? What would the tribunal likely have concluded? Consider:
“the creditor’s normal impatience to see his claim satisfied or at least secured, or the normal risk that the debtor’s ability to pay his debts might deteriorate in the course of the proceedings, are not sufficient to justify provisional payment or security measures. In the absence of factual circumstances which call for an urgent remedy against the foreseeable risk of an aggravation of the situation, provisional payments and providing security in view of the final award fall outside the scope of provisional and protective measures….” Partial Award in Unidentified ICC Case, quoted in Schwartz, The Practices and Experience of the ICC Court, in ICC, Conservatory and Provisional Measures in International Arbitration 45, 61 (1993).
See also On Time Staffing, LLC v. Nat’l Union Fire Ins. Co., 2011 U.S. Dist. LEXIS 50689 (S.D.N.Y.) (“The [arbitral tribunal], in the absence of language in the arbitration agreement expressly to the contrary, possesses the inherent authority to preserve the integrity of the arbitration process to which the parties have agreed by, if warranted, requiring the posting of pre-hearing security…. Otherwise, an [arbitral tribunal] with a well-founded concern that a party was financially unable to satisfy an eventual award would have no recourse to protect itself against the risk that its significant expenditures of time and effort would be for naught.”). Is it appropriate to grant interim relief against parties from Contracting States that do not honor their obligations under the New York Convention? Recall the discussion of the reciprocity requirement. See supra pp. 169–75 & infra pp. 1093–99.
7. Orders requiring performance of contractual or other obligations. Arbitrators sometimes order what common law practitioners refer to as “specific performance,” requiring a party to perform specified acts pursuant to a preexisting contractual or other legal obligation. In some institutional rules, such orders qualify as ordering “on a provisional basis … any relief which the Arbitral Tribunal would have power to grant in an award.” 2014 LCIA Rules, Art. 25(1)(iii). For example, a party may be ordered to continue to perform contractual obligations (e.g., shipping products, providing intellectual property) or to ensure the claimant’s enjoyment of its rights (e.g., voting shares in compliance with a shareholders agreement). See, e.g., Interim Award in ICC Case No. 8894, 11(1) ICC ICArb. Bull. 94, 97-98 (2000) (party ordered to petition administrative authority to cancel import permission); Award in ICC Case No. 6503, 122 J.D.I. (Clunet) 1022 (1995) (order to continue executing a long term contract pending award).
How does an order requiring continued performance of a contract compare with an order to post security for a claim? Should different showings be required to obtain each? Why or why not?
8. Orders preserving status quo. One common form of interim relief is an order preserving the status quo between the parties (or, alternatively, preserving specified contractual or legal relations or factual circumstances). (This form of interim relief is referred to in Article 17(2)(a) of the 2006 UNCITRAL Model Law.) For example, a party may be ordered not to take certain steps—terminating an agreement, disclosing trade secrets, calling a letter of credit, or using disputed intellectual property—pending a decision on the merits. See, e.g., Award in ICC Case No. 3896, X Y.B. Comm. Arb. 47 (1985) (“the best solution, in the Arbitral Tribunal’s opinion, would involve the maintenance, in so far as possible, of the ‘status quo ante,’ that is, the situation which existed at the moment when Terms of Reference Nos. 1 and 2 were signed.”); Final Award in ICC Case No. 7895 11(1) ICC ICArb. Bull. 64, 65 (2000) (party ordered to refrain from selling other party’s products); Final Award in ICC Case No. 9324 (party ordered to reimburse amount of letter of credit if it were called), in Lew, Commentary on Interim and Conservatory Measures in ICC Arbitration Cases, 11(1) ICC ICArb. Bull. 23, 29 (2000). Alternatively, a tribunal may order the parties generally not to take steps that alter the contractual status quo. See, e.g., UNCITRAL Model Law, 2006 Revision, Art. 17(2)(a) (“maintain or restore the status quo pending determination of the dispute”).
Examples of such relief are described as follows:
“an example of an existing right [justifying provisional measures] would be an interest in a piece of property, the ownership of which is in dispute. A provisional measure could be ordered to require that the property not be sold or alienated before the final award of the arbitral tribunal. Such an order would preserve the status quo of the property, thus preserving the rights of the party in the property.” Emilio Augustin Maffezini v. Kingdom of Spain, Procedural Order No. 2 in ICSID Case No. ARB/97/7 of 28 October 1999, ¶14.
Orders preserving the status quo are often cited as the prime examples of appropriate interim measures in international arbitration: “[p]rovisional measures, as a rule, aim at avoiding or preventing a modification of the state of facts or law of the subject matter of the dispute which could render more difficult or impossible later performance.” Extract From A Procedural Order in ICC Arbitration No. 12 of 1989, 12 ASA Bull. 142 (1994).
Interim relief preserving the status quo has been particularly common in investment arbitration. See, e.g., Plama Consortium Ltd v. Repub. of Bulgaria, Order in ICSID Case No. ARB/03/24 of 6 September 2005, ¶38 (provisional measures appropriate “to preserve the status quo”); C. Schreuer et al., The ICSID Convention: A Commentary Art. 47, ¶157 (2d ed. 2009) (“The references in the travaux préparatoires [of the ICSID Convention] to the preservation of the status quo … are an expression of the principle that in the course of litigation the parties must refrain from taking steps that might affect the rights of the side which are the object of the proceedings on the merits. This is particularly so where … a business is at stake which may be damaged through unilateral action….”). Is there any reason to conclude that orders preserving the status quo are more appropriate in investment arbitrations than in commercial arbitrations?
Should the same showing be required to obtain an order preserving the status quo as an order requiring posting of security for a party’s underlying claim? How are the two types of relief different?
9. Orders prohibiting aggravation of parties’ dispute. One type of provisional measure preserving the status quo is an order prohibiting actions that would aggravate or exacerbate the parties’ dispute. (Note that this sort of relief is referred to in Article 17(2)(b) of the 2006 Revision to the UNCITRAL Model Law.) Such orders may be directed towards forbidding public statements (potentially in breach of confidentiality obligations), obstructing or interfering with contractual performance, continuing to breach contractual obligations, and the like.
The principle that arbitrators may take steps to prohibit aggravation of a dispute is well-described in the order of one tribunal: “As held by several ICC awards, provisional measures may be ordered not only in order to prevent irreparable damage but also to avoid aggravation of the dispute submitted to arbitration.” Order in ICC Case No. 7388, in Reiner, Les mesures provisoires et conservatoires et l’Arbitrage international, notamment l’Arbitrage CCI, 125 J.D.I. (Clunet) 853, 889 n.82 (1998). See also Award in ICC Case No. 3896, X Y.B. Comm. Arb. 47 (1985) (“[T]he Arbitral Tribunal considers that there exists, undeniably, the risk of the dispute before it becoming aggravated or magnified, and that the parties should, in the same spirit of goodwill that they have already demonstrated in signing the Terms of Reference refrain from any action likely to widen or aggravate the dispute, or to complicate the task of the Tribunal or even to make more difficult, one way or another, the observance of the final arbitral award.”). The principle has been stated by an ICSID tribunal as follows: “The parties to a dispute over which ICSID has jurisdiction must … refrain from any action of any kind which might aggravate or extend the dispute.” Tokios Tokelés v. Ukraine, Order No. 1 in ICSID Case No. ARB/02/18 1 July 2003, ¶2. See Quiborax SA v. Plurinat’l State of Bolivia, Decision on Provisional Measures in ICSID Case No. ARB/06/2 of 26 February 2010, ¶117 (“rights to be preserved by provisional measures are not limited to those which form the subject matter of the dispute, but may extend to procedural rights, including the general right to the preservation of the status quo and to the non-aggravation of the dispute.… [T]hese latter rights are self-standing rights.”).
What is the rationale for this type of interim relief? Should the same showing be required to obtain an order forbidding aggravation of the parties’ dispute as is required for an order to provide security for the underlying claim in the arbitration?
10. Orders for preservation or inspection of property or evidence. Another form of provisional relief involves orders for the preservation or inspection of property (typically for evidentiary purposes). (This form of interim relief is contemplated by Article 17(2)(d) of the 2006 Revisions to the UNCITRAL Model Law.) Such orders can include the appointment of a neutral third person charged with taking specified actions. For example, an independent expert can be appointed to inspect goods or other property and provide a factual report about its condition. See, e.g., 2010 UNCITRAL Rules, Arts. 26(1), (2); 2012 ICC Rules, Arts. 28(1); 2014 LCIA Rules, Arts. 22(1)(iv), 25(1)(ii). Recall the interim relief ordered (by a court) in South Star, supra pp. 842–44.
Again, should this form of interim relief require the same showing as an order to perform a contract or post security for a party’s underlying claim? What showing should be required to order preservation or inspection of property? Should a showing of serious injury, prima facie claims, or urgency be required?
11. Standards for provisional measures under Article 17A of 2006 UNCITRAL Model Law. Consider again Article 17A of the 2006 Revisions of the UNCITRAL Model Law. What standards does Article 17A provide for an arbitrator’s grant of interim relief? Note the requirement for a showing that “harm not adequately reparable by an award of damages is likely” and that “such harm substantially outweighs the harm that is likely to result to the party against who the measure is directed if the measure is granted.” Note also the requirement of “a reasonable possibility that the requesting party will succeed on the merits of the claim.” Does the standard set forth in Article 17A make sense? How does it compare to the standards developed by arbitral tribunals? Does Article 17A provide for the possibility of different standards for different types of interim relief? Should it?
12. Ex parte provisional measures. It is not uncommon in national court proceedings for interim relief to be issued on an ex parte basis. This type of relief is appropriate where a party could suffer serious damage through a single, rapidly-completed action by its counter-party—for example, calling a letter of credit, transferring needed security to third parties, or destroying critical evidence. Despite its arguable practical utility, there is substantial controversy surrounding an arbitral tribunal’s ex parte consideration of requests for interim relief. As discussed above, most national laws and institutional rules guarantee all parties an opportunity to be heard and equality of treatment. See supra pp. 793–95 & infra pp. 1159–63, 1218–41. Ex parte relief runs strongly counter to these requirements.
Despite this, the 2006 revisions to the UNCITRAL Model Law expressly permit ex parte provisional measures in limited circumstances. The amendments (to Article 17B(1) of the Model Law) provide for “preliminary orders” that may be applied for “without notice to any other party.” Article 17B and 17C provide that ex parte preliminary orders may be issued where the arbitrators conclude that “prior disclosure of the request for the interim measure to the party against whom it is directed risks frustrating the purpose of the measure.” UNCITRAL Model Law, 2006 Revision, Art. 17B(2).
The 2006 revisions to the Model Law were controversial, and as of 2014 about a dozen jurisdictions have incorporated them. Compare van Houtte, Ten Reasons Against A Proposal for Ex Parte Interim Measures of Protection in Arbitration, 20 Arb. Int’l 85 (2004) with Castello, Arbitral Ex Parte Interim Relief: The View In Favor, 58 Disp. Resol. J. 60 (2003). What are the arguments for and against inclusion of ex parte provisional measures in the 2006 revisions to the Model Law? Can an ex parte order, issued by the arbitral tribunal, have coercive effects? See supra p. 876. What does this mean for the practical utility of ex parte orders by the arbitrators? Consider Article 17C(1). Given this provision, what good are ex parte provisional orders from a tribunal? See also 2012 Swiss Rules, Art. 26(3). Is this a desirable development?
13. Security as condition for grant of provisional measures. Consider Article 17 of the UNCITRAL Model Law and Article 183(3) of the SLPIL. The grant of interim relief is generally conditioned on the posting of security by the party requesting such measures, to preserve the adverse party’s ability to recover damages resulting from provisional measures that prove to have been wrongfully requested. For example, if a party successfully obtains interim relief forbidding its counterparty’s sale of a product or use of intellectual property, it may be required to post security sufficient to cover monetary damage claims for lost sales or profits.
14. Form of decision granting provisional measures. If a tribunal concludes that interim measures are appropriate, questions arise as to what form such measures should take. In principle, interim relief can be granted as either an order or an award. (The differences between these forms are discussed below. See supra pp. 806–10, infra pp. 1062–66.) Article 28(1) of the ICC Rules permits arbitrators to grant provisional measures either by order or by award. 2012 ICC Rules, Art. 28(1) (“Any such measure shall take the form of an order, giving reasons, or of an award, as the Arbitral Tribunal considers appropriate.”). Should the form of the decision affect the availability of judicial review? Judicial enforcement?
15. Availability of court-ordered provisional measures. Consider the tribunal’s reliance on Article 8(5) of the 1988 ICC Rules in ICC Case No. 8786. The availability of court-ordered provisional measures, in parallel to tribunal-ordered provisional measures, is discussed below. See infra pp. 904–32. Does the availability of court-ordered provisional measures provide a persuasive reason for a tribunal not to order provisional relief? Would the same argument not work in reverse?
B. JUDICIAL ENFORCEMENT OF PROVISIONAL MEASURES ORDERED BY ARBITRATORS IN INTERNATIONAL ARBITRATION
As discussed above, arbitrators lack the authority, under virtually all national legal regimes, coercively to enforce their orders.15 “The most important and obvious such difference [between court-ordered and tribunal-ordered provisional measures] is that orders given by arbitrators are not self-executing, like those of courts, and must generally take the form of directions to the parties to perform or refrain from performing certain acts.”16 Accordingly, if a party refuses to comply with tribunal-ordered provisional measures, judicial enforcement may be essential to effectuating those measures.
Many national arbitration statutes do not expressly address the judicial enforceability of tribunal-ordered provisional measures issue, leaving enforcement of tribunal-ordered provisional measures to general statutory provisions regarding arbitral awards. That was the case with the original text of the 1985 UNCITRAL Model Law, as well as a number of other arbitration statutes. Under such legislation, the enforcement of tribunal-ordered provisional relief has given rise to significant uncertainties. In part because of these issues, some jurisdictions have enacted specialized legislation providing for judicial enforcement of tribunal-ordered provisional measures, including many Model Law jurisdictions.17 Similarly, the Model Law was revised in 2006 along similar lines to permit specialized enforcement of “orders” of provisional relief.
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